More annual reports from Helloworld Travel Limited:
2023 Report2014 ANNUAL REPORT
Helloworld Limited
(formerly Jetset Travelworld Limited)
Helloworld Limited and Controlled Entities
Annual Report for the year ended 30 June 2014
ABN 60 091 214 998 ASX CODE: HLO
CONTENTS
2 Corporate Information
3 Glossary
4
Chairman’s Report
6 Chief Executive Officer’s Report
8 Financial Performance Summary
10 Directors’ Report
45 Auditor’s Independence Declaration
46 Corporate Governance Statement
52 Consolidated Income Statement
53
Consolidated Statement of Comprehensive Income
54 Consolidated Statement of Financial Position
55
Consolidated Statement of Changes in Equity
56 Consolidated Statement of Cash Flows
57 Notes to the Financial Statements
126 Directors’ Declaration
127
Independent Auditor’s Report
129 ASX Additional Information
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Directors
T Dery Chairman
E Gaines CEO
S Bennett
A Cummins
A John
B Johnson
J M Millar
Company Secretary
S Belton
Registered and
principal office
Level 3
77 Berry Street
North Sydney NSW 2060
Telephone: + 61 2 8229 4000
Facsimile: + 61 2 8920 0110
Auditor
PricewaterhouseCoopers
Darling Park Tower 2
201 Sussex Street
Sydney NSW 1171
Stock exchange
ASX Limited
Level 4
20 Bridge Street
Sydney NSW 2000
ASX code
HLO
Share registry
Computershare
Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford VIC 3067
Telephone: +61 3 9415 5000
Facsimile: + 61 3 9473 2500
Internet address
www.helloworld.com.au
2014 Annual General Meeting
The Annual General Meeting of Helloworld Limited
will be held at the offices of Computershare Investor Services Pty Ltd.
Level 4, 60 Carrington Street, Sydney, NSW
at 1.00pm on Friday 21 November 2014.
helloworldlimited.com.au
GLOSSARY
The following terms have been used throughout this Annual Report:
ACCC
Australian Competition & Consumer Commission
Adjusted EBITDAI
Earnings before interest expense, tax, share-based payments, depreciation, amortisation and impairment
adjusted for significant and/or unusual items of revenue or expense
AGM
ASIC
ASX
CEO
CFO
Annual General Meeting
Australian Securities & Investments Commission
Australian Securities Exchange
Chief Executive Officer
Chief Financial Officer
Company
The parent entity, Helloworld Limited
COO
CVC
Chief Operating Officer
Means any of CVC Capital Partners and its controlled entities
EBITDAI
Earnings before interest expense, tax, share-based payments, depreciation, amortisation and impairment
EM
EPS
FAR
FY12
FY13
FY14
FY15
GM
Group
HLO
JTL
KMP
LTIP
Merger
Plan
PR
Qantas
QBT
QH
RNC
STIP
STS
STSH
TTV
Explanatory memorandum, dated 28 July 2010, released on the ASX on 29 July 2010
Earnings per share
Fixed Annual Remuneration
Financial Year ended 30 June 2012
Financial Year ended 30 June 2013
Financial Year ended 30 June 2014
Financial Year ended 30 June 2015
General Manager
The Helloworld Group, comprising HLO and its subsidiaries
Helloworld Limited
Jetset Travelworld Limited
Key Management Personnel
Long term incentive plan
The merger between STS and HLO (formerly JTL at the time of merger)
Helloworld Limited Performance Rights Plan
Performance Rights
Qantas Airways Limited
QBT Pty Limited
Qantas Holidays Limited
Remuneration and Nominations Committee
Short term incentive plan
Stella Travel Services Holdings Pty Ltd and its subsidiaries
Stella Travel Services Holdings Pty Ltd
Total Transaction Value
UBSAHL
UBS Australia Holdings Ltd
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On behalf of the Board
of Directors, I am pleased to
present the 2014 Annual Report
for Helloworld Limited.”
The financial year ended 30 June 2014 has been one of transformation
for Helloworld Limited (HLO) with the achievement of a number of
important milestones including:
• The launch of the helloworld brand to the Australian consumer
• Close to 1,000 stores signed to the helloworld retail models
• The launch of helloworld.com.au
• Joining the Australian Federation of Travel Agents (AFTA) Travel
Accreditation Scheme (ATAS)
• The sale of Inbound business to AOT Group
• Jetset Travelworld Limited changing its name to Helloworld Limited
helloworldlimited.com.au
In July 2014, helloworld was awarded the highly coveted
‘Best Travel Agency Group (100 outlets or more)’ at the
Australian Federation of Travel Agents (AFTA) National
Travel Industry Awards (NTIA). In addition, seven of
our members and franchisees received awards at the
event and helloworld’s Air Tickets again won the award
for ‘Best Agency Support Service’. To be recognised as
Australia’s Best Travel Agency Group after only one
year, is a significant achievement and the perfect way
to complete a defining 12-month period.
For the year ending 30 June 2014, the Group achieved
an Adjusted EBITDAI1 of $40.6 million which is
25% lower than the corresponding period last year.
Consistent with previous guidance, the full year result
reflects the impact of the transition to helloworld
and the realignment of the commercial arrangements
between HLO and its franchise networks. HLO
has maintained its focus on cost containment and
operating costs for the year were $27.5 million or
10% lower than the corresponding period last year.
Further details of the financial performance of the
Group are included in the CEO’s Report and Operating
and Financial Review on pages 16 to 24.
In accordance with the Company’s stated dividend
payout policy of 40-60% of net profit after tax, the
Board has determined that the Company will not pay
a final dividend.
Looking ahead, HLO starts the new financial year with
a strong, focused, retail network and an exciting new
digital offering in helloworld.com.au. Our strong and
experienced senior management team is now headed by
our recently appointed CEO, Elizabeth Gaines. Elizabeth
brings the highest level of leadership, experience and
capability to her new role and I would like to take this
opportunity to thank Elizabeth, her team and all of our
people for their substantial contribution throughout
the year. I would also like to thank my colleagues on the
Board for their skills and guidance in what has been an
exciting and challenging year.
Today I announced my retirement as Non-Executive
Chairman of the Helloworld Limited Board, with effect
from 30 September 2014. It has been a privilege to be
the Chairman of Helloworld Limited and to guide the
Company successfully through a period of significant
change. In my time as Chairman of the Board we have
completed the merger of Jetset Travelworld with Stella
Travel Services in September 2010, the launch of the new
helloworld brand in July 2013 and the completion of the
strategic transformation of the Group in July 2014.
I would like to thank you, our shareholders, for your
continued support throughout this period of change and
transformation. I believe our Company is well placed to
grow and strengthen under our new brand and your Board,
under its new Chairman, Brett Johnson, is committed to
maximising shareholder value in the coming years.
Tom Dery
Chairman, Helloworld Limited
Sydney, 27 August, 2014
1 Adjusted EBITDAI is earnings before interest expense, tax, share-based payments, depreciation, amortisation and impairment adjusted for
significant and/or unusual items of revenue or expense. Further details are disclosed in Note 6 to the Financial Statements.
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I am delighted to present
my first report as CEO of
Helloworld Limited, and the
results for the year ended
30 June 2014.”
Year in review
For the year ending 30 June 2014, the Group achieved an Adjusted EBITDAI1
of $40.6 million. The Group’s Loss before tax of $61.2 million was impacted
by the loss recorded on the disposal of the Inbound business of $5.5 million,
the implementation costs of $15.8 million associated with the Company’s
transformation plan, the non-cash goodwill impairment of $59.5 million and
the cost of $2.7 million resulting from the Federal Court’s decision in the GST
court case. The Group recorded a Profit before tax of $22.4 million excluding
the impact of these non-recurring items.
This outcome is in line with expectations during a period when the Group
has been engaged in implementing the transformation plan. Following the
launch of helloworld in July 2013, existing and new franchisees and members
were invited to join the network under one of three retail models. The retail
models are: the helloworld Branded model; the helloworld Associate model;
and the helloworld Affiliate model.
1 Adjusted EBITDAI is earnings before interest expense, tax, share-based payments,
depreciation, amortisation and impairment adjusted for significant and/or unusual items of
revenue or expense. Further details are disclosed in Note 6 to the Financial Statements.
helloworldlimited.com.au
Close to 1,000 locations have joined helloworld across
the three retail models. In June 2014, HLO comprised
a network in excess of 1,700 locations across Australia
and New Zealand. This included 300 helloworld Branded
locations, close to 400 helloworld brand-carrying
Associate locations, 300 helloworld Affiliate locations,
440 long standing Affiliates operating under the
Concorde Agency Network and 195 agents operating in
New Zealand. In addition, approximately 100 locations
remain operating under the Harvey World Travel,
Travelscene, Jetset and Travelworld brands.
In addition, over the past year we have entered into
a strategic alliance with Orbitz Worldwide Inc for
helloworld online and have launched our digital offering,
helloworld.com.au, to consumers. In August 2014, we
launched the helloworld.com.au Android mobile app
and the iOS mobile app is expected to be available in
September 2014.
In November 2013, HLO entered into a licensing
agreement with American Express Global Business
Travel. This agreement enables agents who were
previously branded Travelscene American Express
to re-brand as helloworld American Express. It also
provides the opportunity for other helloworld agents
to adopt this co-branding and allows HLO to build on
the success of the long-standing relationship between
American Express and Travelscene.
The Group continues to invest in providing innovative
technology solutions for our travel industry partners and
this approach to innovation and service was recognised
again this year at the National Travel Industry Awards
event held in July 2014 when Air Tickets was again
awarded the ‘Best Agency Support Service’ award.
We are very pleased with the progress the Company
has made in transforming the business over the past
12 months. The most critical phase of the change
process is now complete and we are focused on growing
helloworld’s brand presence in the Australian market.
Further detail on the performance of HLO is provided in
the Operating and Financial Review contained on pages
16 to 24 of this Report.
Outlook
Following the successful implementation of the
helloworld brand and digital offering, HLO expects
to fully participate in the forecast growth in travel in
Australia and New Zealand. Growth will be achieved
through targeted consumer marketing and campaigns
aimed at driving increased customer traffic to our
network of franchisees and members supported by
a strong digital offering.
The size of the Group’s retail network, measured by
the number of locations in Australia and New Zealand,
compared to the number as at December 2013 has
reduced by approximately 7%. Whilst it is difficult to
predict the outcome of the trading conditions for the
next financial year, the decrease in network numbers
combined with the enhanced agent incentive structure
and a commitment to growing the helloworld brand
through an increased investment in marketing is
expected to result in a reduction in Adjusted EBITDAI
of between $5 million and $10 million. This reduction
is expected to be partly mitigated by growth in online
trading through helloworld.com.au.
The focused, consolidated helloworld network will
provide a strong platform for future growth in a
multichannel environment. In addition, with the
implementation of helloworld largely complete and
subject to trading conditions, Profit before tax is
expected to improve significantly in FY15, reflecting
a reduction in implementation costs, impairment
charges and other non-recurring items.
In closing, I would like to thank the senior management,
staff and business partners of helloworld for their
efforts and dedication during this year. As a team,
we are committed to building Helloworld, growing
the helloworld brand and taking full advantage of the
growth opportunities in the Australian and New Zealand
travel industry.
Elizabeth Gaines
Chief Executive Officer, Helloworld Limited
Sydney, 27 August, 2014
7
FINANCIAL
PERFORMANCE SUMMARY
FOR THE YEAR ENDED 30 JUNE 2014
Summary Group Results
Total transaction value (TTV)2
Revenue
Adjusted EBITDAI3
(Loss)/profit before tax
(Loss)/Profit after tax attributable to members
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
Interim dividend per share
Final dividend per share
RECONCILIATION OF ADJUSTED EBITDAI
TO (LOSS)/PROFIT BEFORE INCOME TAX
ADJUSTED EBITDAI
Loss on disposal of investments
Business transformation costs
Share-based payments
Costs relating to GST matter
Costs relating to disposal of investments
VAT settlement
Fair value loss on Investment Property
CEO resignation/retirement costs
Depreciation and amortisation expense
Impairment of goodwill
Finance costs
(LOSS)/PROFIT BEFORE INCOME TAX
For the
year ended
30 June 2014
$’000
4,861,032
291,671
40,561
(61,166)
(63,347)
For the
year ended
30 June 2014
Cents
(14.38)
(14.38)
–
–
For the
year ended
30 June 2014
$’000
40,561
(5,473)
(15,847)
(115)
(2,738)
(60)
–
–
(608)
(14,032)
(59,500)
(3,354)
(61,166)
For the
year ended
30 June 2013
$’000
(restated)1
5,177,423
332,763
54,141
26,654
16,180
For the
year ended
30 June 2013
Cents
(restated)1
3.68
3.63
1.0
0.5
For the
year ended
30 June 2013
$’000
(restated)1
54,141
–
(10,785)
(616)
(31)
–
(606)
(246)
(797)
(10,805)
–
(3,601)
26,654
Change
$’000
(316,391)
(41,092)
(13,580)
(87,820)
(79,527)
Change
Cents
(18.06)
(18.01)
(1.0)
(0.5)
Change
$’000
(13,580)
(5,473)
(5,062)
501
(2,707)
(60)
606
246
189
(3,227)
(59,500)
247
(87,820)
Change
%
-6%
-12%
-25%
-329%
-492%
Change
%
-491%
-496%
-100%
-100%
Change
%
-25%
–
+47%
-81%
+8,732%
–
-100%
-100%
-24%
+30%
–
-7%
-329%
1 Refer to Note 3(b)(iii) of the Consolidated Financial Statements included in this Annual Report regarding the restatements for changes in
accounting policies.
2 Total Transaction Value (TTV) does not represent revenue in accordance with Australian Accounting Standards. TTV represents the price at
which travel products and services have been sold across the Group, as agents for various airlines and other service providers, plus revenue
from other sources. The Group’s revenue is, therefore, derived from TTV. Total TTV does not represent Group cash inflows as some transactions
are settled directly between the customer and the supplier. This information has been extracted from Note 6 of the accompanying Financial
Statements.
3 Adjusted EBITDAI is earnings before interest expense, tax, share-based payments, depreciation, amortisation and impairment adjusted
for significant and/or unusual items of revenue or expense. Adjusted EBITDAI is a financial measure which is not prescribed by Australian
Accounting Standards but is the measure used by the Board to assess the financial performance of the Group and operating segments. This
information has been extracted from Note 6 of the accompanying Financial Statements.
helloworldlimited.com.au Shareholder returns
In accordance with the Company’s dividend policy, the Board has determined that the Company will not pay a dividend
for 2014 financial year.
Explanation of results
This information should be read in conjunction with the Directors’ Report, Financial Report and Auditor’s Report for the
year ended 30 June 2014 and any public announcements made by the Company since that time.
The information provided in this report contains all the information required by ASX Listing Rule 4.3A.
Net tangible assets
Net Tangible Assets per ordinary share
June
2014
Cents
3.75
June
2013
Cents
(restated)1
5.00
1 Refer to Note 3(b)(iii) of the Consolidated Financial Statements included in this Annual Report regarding the restatements for changes in
accounting policies and Note 14(b) for details regarding the restatement as a result of an error.
Net Tangible Assets is calculated as Net Assets less total Intangible Assets.
Net Tangible Assets per ordinary share is based on HLO’s issued capital as the legal parent entity and issuer of this
financial information as at the balance sheet date.
Other information
Helloworld Limited changed its name from Jetset Travelworld Limited on 2 December 2013, and the Company’s ASX
code changed from JET to HLO.
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Experience and expertise
Mr Dery began his working career with Qantas
Airways Limited in 1967 as a Commercial Trainee in
the market research department. After obtaining a
degree in Commerce (Economics) from the University
of New South Wales and a Master of Business
Administration degree at Stanford University in 1975,
he co-founded the advertising agency The Campaign
Palace. In 1979, Mr Dery accepted an appointment
as Visiting Fellow in Marketing at Monash University
prior to joining Ansett Transport Industries.
Mr Dery rose to the role of Assistant General
Manager for Ansett Airlines with responsibility for
all commercial and strategic activities responding
to the challenges of airline deregulation. In the early
1990s, he was named Marketing Man of the Year and
further assumed responsibility for Ansett associated
businesses, East West Airlines, Ansett New Zealand,
Diners Club and Traveland. In 1995, Mr Dery established
Whybin Dery & Partners and, following its sale to
DDB Needham, he was appointed Managing Director
of that firm’s Melbourne operation. Mr Dery was then
appointed Chairman, Asia Pacific for M&C Saatchi
and was responsible for the establishment of offices
throughout the region. He was appointed Chairman of
M&C Saatchi Worldwide on 1 January 2009.
Mr Dery is also Chairman of the Australian Cancer
Research Foundation and a Director of Queenwood
School for Girls and the Dean’s Advisory Council at
University of NSW.
Other current directorships of listed entities
• Nil
Former directorships of listed entities in last 3 years
• Nil
Special responsibilities
• Chairman of the Board
• Chairman of the Remuneration and Nominations
Committee until 27 August 2013 after which
Mr Dery remained a member of the Committee.
• Member of the Audit Committee
Interests in shares
• Nil
The Directors of Helloworld Limited
(HLO) present their Report together
with the Financial Statements of the
Consolidated Entity (Group), being
HLO and the entities it controlled at
the end of, or during, the year ended
30 June 2014 and the Independent
Auditor’s Report.
Directors
The Directors of the Company in
office at any time during or since
the end of the financial year are
as follows:
Tom Dery
Independent, Non-Executive
Director and Chairman
Appointment
Mr Dery was appointed to the
Board on 17 September 2008
and appointed as Chairman on
27 February 2009.
helloworldlimited.com.au
Stephen Bennett
Non-Executive Director
Appointment
Andrew Cummins
Non-Executive Director
Appointment
Mr Bennett was appointed to the Board on
28 April 2011.
Experience and Expertise
Mr Bennett has more than 31 years corporate and
investment banking experience having held senior
management positions with Commonwealth Bank and
Bankers Trust and Senior Advisor, UBS, in Australia
and Hong Kong. Mr Bennett has acted for public
and private companies in mergers and acquisitions,
acquisition financing and corporate restructuring
across all industry sectors and currently holds
the position as Group Treasurer for Consolidated
Press Holdings Limited. He holds an Accounting
Diploma and a Graduate Diploma in Management
(Macquarie University).
Other current directorships of listed entities
• Nil
Former directorships of listed entities in last 3 years
• Nil
Special responsibilities
• Member of the Remuneration and Nominations
Committee
Interests in shares
• 50,000 fully paid ordinary shares in Helloworld Limited
held legally and non-beneficially in the name of Invia
Custodian Pty Ltd – Stephen John Bennett A/C.
Mr Cummins was appointed to the Board on
30 September 2010.
Experience and Expertise
Mr Cummins is Chairman, CVC Capital Partners Pan
Asian Team, and a director of several CVC portfolio
companies. Mr Cummins initially worked as a consultant
with CVC Capital Partners in 1998 and 1999 and
joined the partnership of CVC Asia Pacific Hong Kong
when it was formed in 2000. Prior to working with CVC
Mr Cummins was an executive director of Inchcape Plc,
and of Fosters Brewing Group/Elders IXL, and a partner
of McKinsey & Company.
Mr Cummins is currently Chairman of Stella Travel
Services in the UK and a director of Mantra Group Limited
in Australia and a director of Asia Bottles Holdings
Limited in China. He was previously a director of Nine
Entertainment Company Pty Ltd from 2008 to 2013,
RCTI Inc from 1998 to 2013, I-Med Holdings from 2006
to 2011, Pacific Brands Ltd from 2004 to 2009, and
Inchcape Plc from 1992 to 1997.
Mr Cummins has a Bachelor’s degree in Engineering
from Monash University, Australia, a Graduate Business
Degree from the University of Newcastle, Australia, and
a MBA from Stanford University in the USA.
Other current directorships of listed entities
• Mantra Group Limited
Former directorships of listed entities in last 3 years
• Nil
Special responsibilities
• Member of the Remuneration and Nominations
Committee until 27 August 2013 when Mr Cummins
was appointed Chairman of the committee
Interests in shares
• 952,998 fully paid ordinary shares in Helloworld
Limited held legally and non-beneficially in the name
of Gladstone Investments Limited.
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Elizabeth Gaines
Adrian John
Chief Executive Officer and Executive Director
Non-Executive Director
Appointment
Appointment
Ms Gaines was appointed Chief Executive Officer of
Helloworld Limited on 28 March 2014.
Prior to this, Ms Gaines served as Chief Financial Officer
of Helloworld Limited from 1 October 2010 and, from
October 2012, as Chief Operating Officer and Chief
Financial Officer.
Ms Gaines was appointed to the Board on 30 June 2011.
Experience and Expertise
Prior to joining Helloworld Limited, Ms Gaines was
the Chief Financial Officer of the Stella Group,
Chief Finance and Operations Director of UK-based
Entertainment Rights Plc. and was previously
Chief Executive Officer of Heytesbury Pty Limited.
Ms Gaines has held senior treasury and finance roles
at Bankwest in Australia and Kleinwort Benson in the
UK and qualified as a Chartered Accountant with Ernst
& Young. Ms Gaines is a member of the Institute of
Chartered Accountants in Australia and the Australian
Institute of Company Directors. Ms Gaines holds a
Bachelor of Commerce degree and Master of Applied
Finance degree.
Ms Gaines is a Director of the Australian Federation of
Travel Agents Limited.
Other Current Directorships of listed entities
• Fortescue Metals Group Limited (from February 2013)
• Mantra Group Limited (from June 2009 with Mantra
listing on ASX on 20 June 2014)
Former Directorships of listed entities in last 3 years
• Nil
Special Responsibilities
• Chief Executive Officer
Interests in shares
• 1,200,373 fully paid ordinary shares in Helloworld
Limited held legally and beneficially in the name of
E A Gaines
Mr John was appointed to the Board on 26 May 2011.
Experience and Expertise
Mr John joined Qantas in 2010 and is currently
Executive Manager, Transactions and Airport
Infrastructure. In that role he is responsible for
leading both Qantas’ internal mergers & acquisitions
team which advises Qantas’ Executive Committee
in relation to transactions generally, and for its
Airports Infrastructure team which has responsibility
for managing Qantas’ commercial relationships
with airports. Prior to joining Qantas, Mr John had
been a partner in Ernst & Young where he advised
a wide range of listed and unlisted companies and
private equity across multiple industry sectors on a
variety of corporate finance and strategic matters
including mergers and acquisitions, transaction
due diligence, valuations, capital management and
strategy development.
Mr John also served a period of time as a member
of the Board of Partners of Ernst & Young, Ernst &
Young’s peak governance body. Mr John received
a BSc (Hons) in Civil Engineering from Manchester
University, and is a Member of the Institute of
Chartered Accountants in Australia and the Institute
of Chartered Accountants in England & Wales.
Other Current Directorships of listed entities
• Nil
Former Directorships of listed entities in last 3 years
• Nil
Special Responsibilities
• Member of the Audit Committee
Interests in shares
• Nil
helloworldlimited.com.au Brett Johnson
Non-Executive Director
Appointment
James M Millar AM
Independent Non-Executive Director
Appointment
Mr Johnson was appointed to the Board on
27 February 2009.
Mr Millar was appointed to the Board on
30 September 2010.
Experience and Expertise
Experience and Expertise
Mr Johnson is a professional non-executive director.
He was admitted as a solicitor of the Supreme Court of
New South Wales in 1982 and has more than 28 years
legal experience in Australia and overseas. He has served
on listed company boards for more than eight years.
Mr Johnson was General Counsel of Qantas from July
1995 to December 2012 where he was responsible
for legal risk management in the Qantas Group and
management of the Qantas legal department. Mr Johnson
was also a member of the Qantas Executive Committee
involved in the day-to-day management of the Qantas
Group with particular responsibility for providing
commercial legal support to the Qantas CEO and Board.
Mr Johnson was a director of Scott Corporation from
March 2005 to March 2014, Air Pacific Limited from
December 2011 to May 2012 and Kai Medical Inc until
November 2012.
Other Current Directorships of listed entities
• Nil
Former Directorships of listed entities in last 3 years
• Scott Corporation Limited (from March 2005 to
March 2014)
• IM Medical Limited (from December 2013 to
19 August 2014)
Special Responsibilities
• Member of the Remuneration and Nominations
Committee
• Member of the Audit Committee
Interests in shares
• Nil
Mr Millar is an experienced corporate executive,
advisor and director of a number of Australian
companies and organisations. He has more than
35 years’ experience as both a corporate insolvency
executive, with expertise across a number of
industries, and as Chief Executive Officer of Ernst
& Young, one of Australia’s leading professional
service firms.
Mr Millar has a Bachelor of Commerce degree from
University of NSW, is a Fellow of the Australian
Institute of Chartered Accountants and a Fellow of
the Australian Institute of Company Directors.
Other Current Directorships of listed entities
• Director, Mirvac Limited (from November 2009)
• Director, Fairfax Media Limited (from 1 July 2012)
Former Directorships of listed entities in last 3 years
• Chairman, Fantastic Holdings Limited (from 2 May
2012 to 30 June 2014)
Special Responsibilities
• Chairman of the Audit Committee
Interests in shares
• 40,000 fully paid ordinary shares in Helloworld
Limited held legally and non-beneficially in the
name of Sofeta Pty Ltd – Millar Super Fund A/c.
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Rob Gurney
Directors’ meetings
Former Chief Executive Officer and Executive Director
Rob Gurney served as Chief Executive Officer and
Executive Director during the period 27 August 2012
until his resignation on 28 March 2014.
Mr Gurney was previously Group Executive Qantas
Airlines Commercial.
Mr Gurney has a Bachelor of Economics and a Bachelor
of Business, Accounting and Law from Edith Cowan
University and a Diploma in Marketing from the
Australian Graduate School of Management.
The above Directors were in office for the entire
financial year and up to the date of this Report unless
otherwise stated.
Stephanie Belton
General Counsel and Group Company Secretary
Stephanie Belton was appointed General Counsel for the
Group in September 2010 and Group Company Secretary
on 17 July 2013. Ms Belton was previously employed by
Qantas Airways, initially as Group General Manager in
the Freight division and latterly as Senior Legal Counsel,
acting for the former Jetset Travelworld Group. Prior
to joining Qantas, Ms Belton was Senior Counsel and
Director of Projects for the P&O Group in Sydney and
London and a senior solicitor with Linklaters, Solicitors,
in London.
Ms Belton holds a Bachelor of Law from the University
of Strathclyde, Scotland and a Masters of Business
Administration from the University of Oxford.
The number of meetings of Directors held during the year
and the number of meetings attended by each director
were as follows:
Board meetings
S Bennett
A Cummins
T Dery
E Gaines
R Gurney
A John
B Johnson
J M Millar
Eligible
to attend
Attended
14
14
14
14
10
14
14
14
13
13
13
14
9
13
14
13
Committee membership
As at the date of this report, the Company has an
Audit Committee and Remuneration and Nominations
Committee of the Board.
Current members of the Committees are:
Audit
Remuneration and Nominations
J M Millar (Chairman)
A Cummins (Chairman) (appointed
T Dery
A John
B Johnson
Chairman 27 August 2013)
T Dery (Chairman for period to
27 August 2013)
S Bennett
B Johnson
helloworldlimited.com.au Principal activities
The principal activities during the year of the entities in
the Group were the selling of international and domestic
travel products and services and the operation of a
franchised network of travel agents.
Helloworld Group is one of the leading integrated travel
companies in Australia and New Zealand, operating
several wholesale travel businesses (holiday packaging),
franchise-based and affiliate retail agency networks, air
ticket consolidation, airline representation and travel
management services.
The Group has three operating segments within its
structure, those being Retail, Wholesale and Travel
Management. Within each of these segments the Group
also has an online presence. These operations are located
in Australia, New Zealand, Asia, the United States, South
Africa and the United Kingdom.
The Group’s brands include helloworld, helloworld.com.au,
Travelscene American Express, Harvey World Travel,
Jetset, Travelworld, Qantas Holidays, Viva! Holidays,
Harvey’s Choice Holidays and QBT.
The number of meetings of the Committees held during
the year and the number of meetings attended by each
Director were as follows:
Audit Committee
T Dery
A John
J M Millar
B Johnson
Eligible
to attend
Attended
4
4
4
4
3
4
4
4
Remuneration and
Nominations Committee
Eligible
to attend
Attended
S Bennett
A Cummins
T Dery
B Johnson
2
2
2
2
2
2
2
2
Retirement in office of Directors
Stephen Bennett and James M Millar are the directors
retiring by rotation. Being eligible they intend to offer
themselves for re-election at the 2014 AGM.
Dividends
No dividends have been paid or are recommended to be
paid for the 2014 year.
(Loss)/earnings per share
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
Cents
per share
2014
(14.38)
(14.38)
Cents
per share
2013
3.68
3.63
15
OPERATING AND
FINANCIAL REVIEW
Summary of Results
The results for the year ended 30 June 2014 are summarised as follows:
Total transaction value (TTV)2
Revenue
Adjusted EBITDAI1
(Loss)/profit before tax
(Loss)/profit after tax attributable to members
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
Interim dividend per share
Final dividend per share
30 June
2014
$ million
4,861.0
291.7
40.6
(61.2)
(63.3)
Cents
per share
(14.38)
(14.38)
–
–
30 June
20133
$ million
5,177.4
332.8
54.1
26.7
16.2
Cents
per share
3.68
3.63
1.0
0.5
% Change
-6%
-12%
- 25%
- 329%
- 492%
% Change
- 491%
- 496%
-100%
- 100%
1 Adjusted EBITDAI is earnings before interest expense, tax, share-based payments, depreciation, amortisation and
impairment adjusted for significant and/or unusual items of revenue or expense. Adjusted EBITDAI is a financial
measure which is not prescribed by Australian Accounting Standards but is the measure used by the Board to assess
the financial performance of the Group and operating segments. A reconciliation of Adjusted EBITDAI to (Loss)/
Profit before tax is contained in Note 6 of the accompanying Financial Statements.
2 Total Transaction Value (TTV) does not represent revenue in accordance with Australian Accounting Standards. TTV
represents the price at which travel products and services have been sold across the Group, as agents for various
airlines and other service providers, plus revenue from other sources. The Group’s revenue is, therefore, derived
from TTV. Total TTV does not represent the Group cash inflows as some transactions are settled directly between
the customer and the supplier. This information has been extracted from Note 6 of the accompanying Financial
Statements.
3 Refer to Note 3(b)(iii) of the Financial Statements included in this Annual Report regarding the restatements for
changes in accounting policies.
helloworldlimited.com.au Year in Review – Key Highlights:
• TTV decreased 6% to $4.9 billion for the year
ended 30 June 2014.
• Adjusted EBITDAI for 2014 of $40.6 million
decreased by 25%.
• HLO revenue from operating activities for the year
ended 30 June 2014 was $291.7 million compared
with $332.8 million for 2013.
• The HLO result was a Loss before income tax of
$61.2 million for the year ended 30 June 2014.
The loss after tax is stated after the loss on disposal
of the Inbound business of $5.5 million, non-cash
goodwill impairment of $59.5 million, business
transformation costs of $15.8 million and costs
associated with the GST case of $2.7 million.
• The tax expense for the period was $2.1 million.
• Basic earnings per share for the year was a loss of
14.38 cents per share.
• helloworld was awarded Australia’s Best Travel
Agency Group (100 outlets or more) by AFTA.
• The Group continued the positive momentum in
the business transformation strategy with the
achievement of key milestones including:
– Launch of the helloworld brand to the Australian
consumer
– Close to 1,000 stores signed to the helloworld
retail models
– Launch of helloworld.com.au
– Joined Australian Federation of Travel Agents
(AFTA) Travel Accreditation Scheme (ATAS)
– Sale of Inbound business
– Jetset Travelworld Limited changed its name
to Helloworld Limited
For the year ending 30 June 2014, the Group achieved an
Adjusted EBITDAI of $40.6 million which was 25% lower
than the corresponding period last year. The full year
result reflects the impact of the transition to helloworld
and the realignment of the commercial arrangements
between HLO and its franchise networks. HLO has
maintained its focus on cost containment and operating
costs for the year were $27.5 million or 10% lower than
the corresponding period last year.
The Group’s Loss before tax of $61.2 million includes the
$5.5 million loss recorded on the disposal of the Inbound
business, non-cash goodwill impairment of $59.5 million,
implementation costs of $15.8 million associated with
the Company’s transformation plan and $2.7 million in
costs arising from the Federal Court decision in the GST
court case. The Group recorded a profit before tax of
$22.4 million excluding the impact of these non-recurring
items. This outcome is in line with expectations during a
period when the Group has been engaged in implementing
the transformation plan.
Following the launch of helloworld in July 2013, existing
and new franchisees and members were invited to
join helloworld under one of three retail models:
the helloworld Branded model; the helloworld Associate
model; and the helloworld Affiliate model.
The new helloworld retail models addressed the need
to strengthen the consumer offering and optimise the
individual businesses of franchisees through consolidated
marketing and an enhanced incentive structure.
Importantly, franchisees and members of the Branded
and Associate models now benefit from helloworld’s
Customer Charter and Customer Protection Policy, plus a
range of additional support services designed to enhance
the competitiveness and efficiency of their businesses.
17
300
400
300
440
195
100
helloworld Branded
helloworld Associate/Corporate
helloworld Affiliate
Concorde Agency Network
New Zealand
Other Brands1
Close to 1,000 locations have joined helloworld across
the three retail models. In June 2014, HLO comprises a
network in excess of 1,700 locations across Australia and
New Zealand, including 300 helloworld Branded locations,
close to 400 helloworld brand-carrying Associate
locations, 300 helloworld Affiliate locations, 440 long
standing Affiliates operating under the Concorde Agency
Network, 195 agents operating in New Zealand and
approximately 100 locations that will remain operating
under the Harvey World Travel, Travelscene, Jetset and
Travelworld brands.
A combined 700 branded and brand-carrying associate
locations means that the helloworld brand has a strong
visual presence across Australia. To-date, over 270
Branded locations have been refreshed to the helloworld
branding and signage. In addition, 18 locations have been
refitted as Ambassador stores, featuring new branding,
design, layout, interiors and furniture. The majority of
brand-carrying Associate stores are already refreshed.
The response to the store refresh from franchisees,
members and consumers has been overwhelmingly
positive and the brand’s momentum is continuing to
build nationwide.
1 Other Brands include Harvey World Travel (excluding South Africa),
Jetset, Travelworld, Travelscene and Travelscene American Express.
helloworld concept store
The sustained investment in marketing activity has
already delivered a significant presence benefiting our
agents, customers and suppliers. helloworld integrated
campaigns feature in all states across TV, metro
and regional press, billboards, digital, search engine
marketing and social media.
In July 2014, helloworld was awarded the highly coveted
‘Best Travel Agency Group (100 outlets or more)’ at the
Australian Federation of Travel Agents (AFTA) National
Travel Industry Awards (NTIA).
To be recognised as Australia’s Best Travel Agency Group
after only one year, is a significant achievement and a
strong validation of the strength of HLO’s network of
expert travel agents and the HLO franchise model
value proposition.
helloworldlimited.com.au helloworld.com.au
Android app
Seven helloworld network members won NTIA awards
and should be congratulated for their achievements:
• Best Travel Agency Retail – Single Location,
Bicton Travel, WA
• Best Travel Agency Retail – Multi Location,
helloworld Hunter Travel Group, NSW
• Best Travel Agency Corporate – Single Location,
Goldman Travel, NSW
• Best Travel Agency Corporate – Multi Location,
The Travel Authority
• Best Travel Consultant – Retail,
Sophie Brooks, helloworld Lane Cove, NSW
• Best Travel Agency Manager – Retail,
Michelle McNamara, Phil Hoffmann Travel, SA
• Rookie of the Year Agent,
Bridgit Little, Globenet Travel, QLD
In addition, Air Tickets again won the award for
‘Best Agency Support Service’.
In late 2013, the Group launched the digital offering
helloworld.com.au. The new website offers the
convenience of researching and booking online and
also included on the website is an agent finder for
customers to locate their nearest helloworld agent
creating a multichannel environment and convenience
for consumers.
In August 2014, helloworld.com.au launched the
Andriod mobile app and the iOS mobile app is expected
to be available in September 2014.
During the year, HLO also entered into key
strategic partnerships with Ortbiz Worldwide and
American Express.
In November 2013, HLO signed a 10 year Strategic
Alliance Agreement with Orbitz Worldwide. This
agreement is a key component in helloworld’s
multichannel strategy and allowed HLO to access
Orbitz Worldwide’s global technology platform. This
platform is the base powering helloworld.com.au.
Also in November 2013, HLO renewed its brand
licensing agreement with American Express Global
Business Travel. The agreement enables agents
previously branded Travelscene American Express to
re-brand as helloworld American Express, while also
extending the opportunity of co-branding to other
helloworld agents. The revised contract recognises
the long standing relationship between American
Express and Travelscene.
19
Segmental Review
HLO operates across three segments within the travel industry: Retail, Wholesale and Travel Management.
The operations of Retail primarily comprise acting as a franchisor of retail travel agency networks including helloworld,
Harvey World Travel, Travelscene American Express, Jetset Travel and Travelworld. The primary purpose of Wholesale is
to procure air, cruise and land product for packaging and sale through retail travel agency networks. Travel Management
provides travel management services to corporate and government customers including booking of flights and
accommodation.
Corporate charges are only allocated to operating segments to the extent that they are considered part of the core
operations of any segments.
HLO operates websites and online distribution through all segments.
The Board assess the performance of the segments based on a measure of Adjusted EBITDAI. Adjusted EBITDAI is
earnings before interest expense, tax, share-based payments, depreciation, amortisation and impairment adjusted for
significant and/or unusual items of revenue or expense. A reconciliation of Adjusted EBITDAI to (Loss)/Profit before
tax is included in Note 6(c)(ii) to the Financial Statements. The segmental results for Retail, Wholesale and Travel
Management have been extracted from Note 6 to the Financial Statements. Revenue margin has been calculated as
Revenue as a percentage of TTV.
Retail Segment
HLO operates as the franchisor for multiple retail travel agency networks, including helloworld, Jetset Travel, Travelworld,
Travelscene American Express and Harvey World Travel and the Concorde Agency Network (CAN – an independent
network affiliated to the Group) in Australia. In New Zealand the Group also operates as the franchisor for United Travel
and The Travel Brokers.
HLO owns and operates a ticketing facility, Air Tickets, which services the helloworld, Jetset Travel, Travelworld,
Travelscene American Express, Concorde Agency Network, Harvey World Travel networks and over 200 independent
travel agents.
Air Tickets operates in all Australian mainland states with technology allowing agents to issue tickets 24 hours a day,
seven days a week. Air Tickets technology also operates within New Zealand via Stella Travel Services (NZ) Ltd. In July
2014 Air Tickets was awarded ‘Best Agency Support Services’ at the National Travel Industry Awards for the fifth
consecutive year. Year on year Air Tickets has continued to set the industry standard for ticketing technology.
In late 2013, the Group launched the digital offering helloworld.com.au. The new website offers the convenience of
researching and booking online and also included on the website is an agent finder for customers to locate their nearest
helloworld agent creating a multichannel environment and convenience for consumers.
In August 2014, helloworld.com.au launched the Andriod mobile app and the iOS mobile app is expected to be available
in September 2014.
Total transaction value (TTV)
Revenue
Operating expenses
Adjusted EBITDAI
Revenue Margin (%)
June 2014
$’000
3,586,527
160,686
(110,148)
50,538
4.5%
June 2013
$’000
3,766,103
183,024
(115,445)
67,579
4.9%
Change
$’000
(179,576)
(22,338)
5,297
(17,041)
Change
%
-5%
-12%
-5%
-25%
The Retail segment earns revenue from franchise fees, commissions from airline and leisure partners derived from the
arrangement of tours and travel and override commission revenue. Further details on the revenue recognition policies of
the Group are contained in Note 3(e) of the Financial Statements.
The Retail segment has undergone a comprehensive change following the implementation of the transformation
program which has resulted in a reduction in network size of approximately 7% when compared to December 2013.
helloworldlimited.com.au Following a review of the carrying value of intangible assets at 30 June 2014, it was considered prudent to effect a
non-cash goodwill impairment of $59.5 million.
The Retail segment generated TTV of $3.6 billion for the year ended 30 June 2014, representing a reduction of 5%
compared to the prior comparative period. The Retail segment generated Adjusted EBITDAI of $50.5 million which is
a 25% decrease on the prior year result of $67.6 million. Revenue decreased by 12% to $160.7 million with operating
costs reducing by $5.3 million (5%) for the year reflecting a continued focus on cost management. The improvement in
operating costs of $5.3 million is primarily attributable to cost reduction realised through employee cost savings which
reflect lower employee full time equivalents (FTEs) over the same period.
Wholesale Segment
HLO operates several wholesale brands:
• Qantas Holidays is one of Australia’s leading travel wholesalers and has been providing holiday packages for more
than 38 years where the flight component is provided predominantly by Qantas Airways.
• Viva! Holidays sells packages where the flight component is provided by major airlines (excluding Qantas Airways)
servicing the Australian market.
• Harvey’s Choice Holidays offers a range of international hotel, tours, air and cruise travel options for the independent
traveller.
• Ready Rooms provides an online solution for dynamic and traditional wholesale inventory for preferred travel agents
to sell to their customer base.
• Travel IndoChina specialises in guided small group journeys and bespoke tailor-made independent itineraries to South
East Asia in key destinations in Vietnam, Cambodia, Laos, China, Mongolia, Japan, India, Sri Lanka, Bhutan and Burma.
• GO Holidays is a New Zealand based wholesale brand that sells outbound packaged holiday products for destinations
around the world.
• Qantas Vacations (a brand of Stella Travel Services USA Inc) provides customised tour and travel arrangements for
visitors from North America to Australia, New Zealand, Fiji and Tahiti.
In September 2013 HLO sold its investment in the ATS Pacific Businesses in Australia, New Zealand and Fiji to the AOT
Group Limited. Further information in relation to the disposal is contained in Note 31 of the Financial Statements.
In 2014 Qantas Holidays and Viva! Holidays was again nominated as a finalist for the NTIA Award for Best Wholesaler –
Australian Product and Best Wholesaler – International Product.
Total transaction value (TTV)
Revenue
Operating expenses
Adjusted EBITDAI
Revenue Margin (%)
June 2014
$’000
708,229
88,596
(76,189)
12,407
12.5%
June 2013
$’000
(restated1)
799,255
104,731
(91,114)
13,617
13.1%
Change
$’000
(91,026)
(16,135)
14,925
(1,210)
Change
%
-11%
-15%
-16%
-9%
1 Refer to Note 3(b)(iii) and Note 6(v) regarding the restatement for changes in accounting policies.
The Wholesale segment earns revenue commissions from airline and leisure partners derived from the arrangement of
tours and travel and override commission revenue.
Adjusted EBITDAI for the Wholesale segment for the year ended 30 June 2014 was $12.4 million with TTV decreasing
by 11% from $799 million to $708 million. Net Revenue of $88.6 million decreased by 15% compared to the prior
comparative period and operating costs in the Wholesale segment have reduced by 16%.
The results for the year ended 30 June 2014 include trading for the ATS Inbound business until the disposal of the
business on 30 September 2013. When the Inbound business trading is excluded, Wholesale Adjusted EBITDAI increased
by $0.7 million (6%) and TTV and Net Revenue decreased by 4% and 5% respectively. The Revenue Margin decreased
marginally by 0.1% from 12.4% to 12.3%, reflecting growth in lower margin cruise volumes and the mix of business
between online and offline channels. The Revenue Margin improved by 2% in the second half of FY14 compared to the
first half, as a result of a continued focus on pricing initiatives and reduced volatility in foreign exchange rates. Excluding
21
the ATS Inbound business, operating costs decreased by $5.0 million (6%) due to the continued focus on productivity
improvements and operational efficiencies.
Travel Management Segment
Within the Travel Management segment, HLO operates:
• QBT
• Atlantic & Pacific American Express (APX) in New Zealand.
QBT is one of the largest travel management businesses in Australia, arranging business travel for Federal and State
government departments, large corporations and SMEs. QBT provides a full travel management service, including
a 24 hour booking facility for air, land and cars for corporate customers, and offers online corporate travel bookings
through a choice of online booking tools and state-of-the-art reporting and expense management.
QBT is a global partner of GlobalStar. GlobalStar is a worldwide Travel Management Company (TMC) owned and managed
by local entrepreneurs with over 85 market leading enterprises, representing over US$13 billion in sales. This partnership
enables us to combine GlobalStar’s expertise, strength and commitment with our strengths in the Australian market to
deliver multinational solutions to global clients.
APX is a leading New Zealand based travel management business providing a full end-to-end travel management service
and has been the New Zealand Travel Partner Network representative for American Express Business Travel since 2006.
Following a long and vigorous process, APX was appointed to the New Zealand All of Government TMC panel in July
2012 for a minimum of three years.
Total transaction value (TTV)
Revenue
Operating Expenses
Adjusted EBITDAI
Revenue Margin (%)
June 2014
$’000
June 2013
$’000
566,276
37,505
(36,992)
513
6.6%
612,065
39,687
(42,220)
(2,533)
6.5%
Change
$’000
(45,789)
(2,182)
5,228
3,046
Change
%
-7%
-5%
-12%
+120%
The Travel Management segment traded profitability in FY14, with an Adjusted EBITDAI of $0.5 million representing an
improvement of 120% on the prior comparative period loss of $2.5 million.
TTV attributable to the Travel Management segment decreased by 7% to $566 million for the year ended 30 June 2014.
The reduction in TTV primarily reflects reduced corporate customer volumes. Revenue decreased by $2.2 million (5%)
compared to the prior comparative period, with a focus on pricing initiatives minimising the impact of the lower TTV.
Operating expenses in the Travel Management segment decreased by $5.2 million (12%) during the year as a result of
realising the benefits of the restructuring initiatives and productivity improvements. The Travel Management segment
has continued to invest in innovative technology in order to drive efficiency and automation through the business.
helloworldlimited.com.au Outlook
Following the successful implementation of the helloworld
brand and digital offering, HLO expects to fully participate
in the forecast growth in travel in Australia and New
Zealand. Growth will be achieved through targeted
consumer marketing and campaigns aimed at driving
increased customer traffic to our network of franchisees
and members supported by a strong digital offering.
The size of the Group’s retail network, measured by number
of locations in Australia and New Zealand, compared
to the number as at December 2013 has reduced by
approximately 7%. Whilst it is difficult to predict the
outcome of the trading conditions for the next financial
year, the decrease in network numbers combined with the
enhanced agent incentive structure and a commitment
to growing the helloworld brand through an increased
investment in marketing is expected to result in a reduction
in Adjusted EBITDAI of between $5 million and $10 million.
This reduction is expected to be partly mitigated by growth
in online trading through helloworld.com.au.
The focused, consolidated helloworld network will
provide a strong platform for future growth in a
multichannel environment. In addition, with the
implementation of helloworld largely complete and
subject to trading conditions, Profit before tax is
expected to improve significantly in FY15, reflecting a
reduction in implementation costs, impairment charges
and other non-recurring items.
Business Risks
There are a number of factors, both specific to HLO and of
a general nature, which may impact the future operating
and financial performance of HLO. The specific material
risks faced by HLO, and how HLO manages these risks, are
set out below:
• Consumer Discretionary Spending
Operating in the Travel industry, HLO relies on
consumer discretionary spend, consumer sentiment
and corporate expenditure. As a result, adverse
changes to the general economic environment can
impact financial results. HLO mitigates this risk by
keeping abreast of global economic and consumer
data and industry trends and managing expenses
in line with changes in the environment.
• Competition and Margin Risk
The highly competitive nature of the travel industry,
combined with the risk of new entrants in the online
market, may impact on revenue margins and results
of the Group. This is mitigated by carefully managing
margins and by working with key suppliers. The Group
closely monitors product availability and pricing
against a range of other travel providers to ensure it
maintains its position in a competitive environment.
• Foreign Exchange Exposure
Within the Wholesale segment, a significant amount
of international travel product is sold in local currency
and suppliers are paid in foreign currencies. In order to
mitigate the resulting exchange fluctuation risk, HLO
has a hedging policy and enters into forward exchange
contracts to match expected future cash flows.
• Key customers and suppliers
Changes in key customers and suppliers could have an
impact on the financial results of HLO. HLO mitigates
this risk by ensuring, where possible, formal agreements
are in place and by working closely with key customers
and suppliers to ensure that HLO responds to any
changes in their economic circumstances or business
requirements.
People
At 30 June 2014, HLO has 1,469 Full Time Equivalent
employees (FTE). This compares to 2,038 at 30 June
2013, with the reduction including the impact of the sale
of ATS Inbound business.
As a result of the reduced FTE, employee expenditure
for the year ended 30 June 2014 decreased by 13% or
$19.6 million. When the ATS Inbound business is excluded,
employee expenditure reduced by 9% or $13.4 million.
While the majority of the Group’s employees are based in
either Australia or New Zealand, the Group has employees
in USA, Vietnam, Cambodia, Laos and the United Kingdom.
This is illustrated graphically below, along with an analysis
of employees by segment.
FTE Breakdown by Country
60%
28%
4%
5%
1%
1%
1%
Australia
New Zealand
USA
Vietnam
Cambodia
UK
Laos
FTE Breakdown by Segment
26%
42%
22%
10%
Retail
Wholesale
Travel Management
Shared Services
23
Review of financial condition
On-market share buy-back program
Capital structure
Helloworld Limited has 440,548,572 shares on issue of
which QH Tours Limited (a subsidiary of Qantas Airways
Limited) holds 29%, Europe Voyager NV holds 27%,
UBS Australia Holdings Limited holds 18%, Sintack Pty
Limited holds 12%, and with the remaining 14% being
held by other shareholders including management.
Dividend
The Company has previously stated that its policy is to
pay a dividend payout ratio in the range of 40-60% of
net profit after tax. As the Company made a loss for the
year ended 30 June 2014, primarily due to the goodwill
impairment charge, in accordance with the dividend
policy, the Board determined that the Company will not
pay a final dividend in 2014.
Liquidity and funding
The Group maintains a strong balance sheet with net
assets of $377.0 million and a positive working capital
position at 30 June 2014.
On 17 April 2014, existing loan terms and conditions
were re-negotiated with the Group’s banking partner.
The facility was extended to 17 April 2019. As part of the
re-negotiated terms, an additional amortising facility of
$15.0 million was agreed. The Group incurred $1.1 million
of borrowing costs that were capitalised and will be
amortised over the duration of the new facility.
At 30 June 2014 the Group has long term debt of
$25.3 million (2013: $24.4 million), net of $2.0 million
of deferred borrowing costs (2013: $1.4 million)
and access to finance facilities of $96.4 million with
$35.2 million utilised and remaining headroom available
of $61.2 million.
The net cash position as at 30 June 2014 for the Group
was $184.3 million (2013: $234.9 million). General
cash at 30 June 2014 was $28.5 million compared to
$34.5 million at 30 June 2013. This is a positive result
considering that during the year the Group funded the
cost of the strategic transformation.
Net cash outflow from operating activities was
$30.8 million (2013: inflow $35.5 million). The operating
cash outflow for 30 June 2014 was primarily as a result
of an additional airline payment (IATA settlement) in June
2014 and the payment of business transformation costs.
On 27 August 2014, Helloworld Limited announced an
on-market share buy-back program of up to 2.5% of the
Company’s issued share capital. The Board considers
that it is appropriate to establish a buy-back program
to give the Company flexibility to repurchase shares on
an opportunistic basis, particularly in times of market
or share price volatility. The buy-back will not limit the
Company’s future expansion plans and the Company
remains fully committed to its growth strategy.
Significant events after the
balance date
Apart from the on-market share buy-back program, the
Directors are not aware of any matter or circumstance
that has arisen between 30 June 2014 and the date
of signing of this report that has significantly, or may
significantly, affect the operations of the Group, the
results of the operations of the Group or the state of
the Group’s affairs in future financial years.
Likely developments
The economic outlook for FY15 continues to be
uncertain due to a variety of economic circumstances
and it is difficult to predict the outlook for demand.
More information on the likely developments is included
in the Operating and Financial Review on page 23.
Environmental regulation
The Group’s operations are not subject to any significant
environmental regulations under either Commonwealth
or State legislation.
In 2012, HLO became a member of The Green Building
Council of Australia (GBCA). GBCA was established
in 2002 to develop a sustainable property industry
in Australia and drive the adoption of green building
practices through market-based solutions. The Green
Star is a rating tool designed for building owners
and tenants to assess and award the environmental
performance of their buildings and interior fit outs.
A green fit out will include issues such as access to
natural light, waste management, energy conservation,
low emission paints and timber from sustainable forests.
helloworldlimited.com.au Indemnification and insurance
of Directors and officers
Indemnification
The Company has agreed to indemnify the Directors
and executive officers (or former Directors or executive
officers) of the Company against:
(a)
any liability (other than for legal costs) incurred by
the Director or executive officer;
(b)
any legal costs (not limited to taxed costs)
reasonably incurred by the Director or executive
officer in connection with:
(i)
any claim brought against or by the Director or
executive officer of the Company; or
(ii)
any investigative proceeding, including (without
limitation) in obtaining legal advice for the
purposes of responding to, preparing for or
defending any of the above; and
(d)
(e)
(c)
any legal costs (not limited to taxed costs)
reasonably incurred by the Director or executive
officer in or in connection with, the discharge of the
Director or executive officer’s duties as an officer of
the Company, provided that the advice is obtained
in accordance with the Board Charter which requires
approval from the Chairman who will facilitate
obtaining such advice and, where appropriate,
disseminate such advice to all Directors.
Insurance premiums
The Company has paid insurance premiums of $76,711
during the financial year to cover current and former
Directors’ and officers’ liability and legal expenses. The
insurance premiums relate to:
• costs and expenses incurred by the relevant officers
in defending proceedings, whether civil or criminal and
whatever their outcome; and
• other liabilities that may arise from their position, with
the exception of conduct involving a wilful breach of
duty or improper use of information or position to gain
a personal advantage.
REMUNERATION
REPORT
(AUDITED)
This 2014 Remuneration Report outlines the
remuneration arrangements for the Key Management
Personnel (‘KMP’) of the Group in accordance with the
requirements of the Corporations Act 2001 and its
Regulations.
The report contains the following sections:
Directors and other KMP disclosed in this report
(a)
(b) Remuneration governance
(c)
Relationship between remuneration and the
Group’s performance
Overview of non-executive director
remuneration policy and framework
Overview of executive remuneration policy
and framework
(f) Use of remuneration consultants
(g)
Voting and comments made at the Company’s
2013 Annual General Meeting
(h) Details of remuneration
(i) Service agreements
(j)
Details of remuneration: share based
compensation and bonuses
Equity investments held by KMP
(k)
(l) Loans to KMP
(m) Other transactions with KMP
(a) Directors and other KMP disclosed
in this report
For the purpose of this report, KMP of the Group
are defined as those persons having authority and
responsibility for planning, directing and controlling
the major activities of the Group, directly or indirectly,
including any Director (whether executive or otherwise).
For the purposes of this report, the term ‘executive’
encompasses the CEO, senior executives and General
Managers (‘GM’) of the Group.
25
Directors and other KMP disclosed in this report are:
Non-executive and executive directors
(see pages 10 to 14 for details about each director)
Elizabeth Gaines
Tom Dery
Adrian John
Stephen Bennett
Brett Johnson
Andrew Cummins
James M Millar
Robert Gurney (resigned
28 March 2014)
Other KMP
Name
Russell Carstensen
Peter Egglestone
(KMP from 1 July 2013)
Greig Leighton
(KMP from 1 July 2013)
Position
GM Air Services
Head of Wholesale
CEO New Zealand
Jenny Macdonald was appointed Chief Financial Officer
on 18 August 2014 and is a KMP from this date.
Andrea Slark and Michael Thompson are no longer
KMP from 1 July 2013; their employment with the
Group continues.
(b) Remuneration governance
Remuneration and Nominations
Committee (RNC)
The RNC of the Board is responsible for reviewing
remuneration arrangements and making
recommendations to the Board in respect of the
Directors and executives.
The RNC assesses the nature and amount of
remuneration of executives on a periodic basis by
reference to relevant employment market conditions,
with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high quality,
high performing Board of Directors and executive team.
The Corporate Governance Statement provides further
information on the role of this Committee.
(c) Relationship between remuneration
and the Group’s performance
The Group’s results for the 2014 financial year
represented a decrease in Adjusted EBITDAI compared to
the previous year, and was in line with the Board approved
operating budget. Performance related payments to the
CEO, COO & CFO and senior executives for 2014 include
STIP payments, with executives receiving an average of
46.2% of maximum STIP. In addition, the Performance
conditions for Tranche 3 of the 2011 Performance Rights
(PRs) in respect of the Long-term Incentive Plan were
met with 50.5% of the total tranche vesting. These PRs
vested after 30 June 2014 but before the date of signing
this report. The performance conditions for Tranche 2 of
the 2012 PRs and Tranche 1 of the 2013 PRs were not
met and these PRs lapsed after 30 June 2014 but before
the date of signing this report.
Due to the merger in September 2010, Company
performance prior to the financial year ended 30 June
2012 is not comparable.
Adjusted EBITDAI is the measure used by the Board to
assess the Group and segment performance. The graph
below illustrates the link between the Group’s Adjusted
EBITDAI and payments made under the STIP. While there
is a strong correlation, this correlation will be stronger
in some years compared to others, since STIP awards
are made based on an assessment of both financial and
non-financial performance measures.
Adjusted
EBITDAI
s
n
o
i
l
l
i
M
60
55
50
45
40
35
30
2012
EBITDAI
2013
2014
Actual % to Total
STIP as %
of target
70%
65%
60%
55%
50%
45%
40%
35%
30%
Adjusted earnings per share (Adjusted EPS) is the
key performance criteria used to assess the long term
incentive plan (LTIP). Adjusted EPS is based on the
Group’s EPS adjusted for certain significant unusual
and/or non-recurring amounts which are approved by
the RNC.
helloworldlimited.com.au The table below shows how Adjusted EPS compares to
the percentage of LTIP PRs vested in that financial year.
Adjusted EPS
in cents
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2012
2013
2014
EPS
% Vested of Normalised Grants
LTIP as %
of target
100%
80%
60%
40%
20%
0%
(d) Overview of non-executive director
remuneration policy and framework
Objective
The Board seeks to set aggregate remuneration at a level
which provides the Group with the ability to attract and
retain Directors of the highest calibre, at a cost which is
acceptable to shareholders.
In accordance with best practice corporate governance,
the structure of Non-Executive Director remuneration is
separate and distinct and is further detailed below.
Structure
The Company Constitution and the ASX Listing Rules
specify that the aggregate remuneration of Non-
Executive Directors shall be determined from time to
time by a general meeting. The latest determination was
at the 2010 Annual General Meeting held on 29 November
2010 when shareholders approved an aggregate
remuneration of $1,500,000 per year.
The amount of aggregate remuneration to be approved
by shareholders, together with the fee structure, is
reviewed annually. The Board considers advice from
external consultants from time-to-time as well as
fees paid to Non-Executive Directors of comparable
companies when undertaking the annual review process.
The Board is not proposing any change to the aggregate
level of remuneration.
Each Non-Executive Director, with the exception of the
Chairman, receives a fee of $100,000 per annum for
being a director of the Company. An additional fee of
$10,000 per annum is paid for each Board Committee
on which a Director is a member with the Chairman of
the Audit Committee receiving an additional fee of
$25,000. The payment of additional fees for serving on
or chairing a committee recognises the additional time
commitment required by Directors who serve on one
or more Committees. Fees paid in respect of Directors
appointed by major shareholders are generally paid to
those major shareholders rather than to the individual
Director unless specified otherwise.
The Chairman receives a fee of $225,000 which includes
all Board Committee fees. The payment of the higher
fee to the Chairman recognises the additional time
commitment required by him.
There is no intention to increase the individual director
fees for the year ended 30 June 2015. The Directors’ fees
have not increased since 1 July 2011.
Non-Executive Directors do not receive any performance
related remuneration or retirement allowances.
The remuneration of Non-Executive Directors for the
year ended 30 June 2014 and 30 June 2013 is detailed in
this report.
The process for review of Non-Executive Directors’
performance is explained in the Corporate Governance
Statement.
(e) Overview of executive
remuneration policy and framework
Objective
The Group aims to reward executives with a level and mix
of remuneration commensurate with their position and
responsibilities within the Group. The remuneration
framework of the Group embodies the following principles:
• provide competitive rewards to attract high calibre
executives;
• have a portion of remuneration ‘at risk’, dependent upon
meeting pre-determined performance benchmarks;
• link executive rewards to shareholder value; and
• establish appropriate, demanding performance hurdles
in relation to variable executive remuneration.
Structure
In determining the level and make-up of executive
remuneration, the RNC considers advice from external
consultants from time to time and reviews market levels
of remuneration for comparable executive roles. No
advice was sought from external consultants for the
financial year 2014. All executives are employed under
a standard contract, details of which are set out below.
27
The Group’s remuneration structure for executives is
based on a Total Reward methodology consisting of:
(ii) Short term incentive plan (STIP)
arrangements
(i)
Fixed Annual Remuneration (‘FAR’)
Individual performance, skills, expertise and
experience are used to determine the employee’s
fixed remuneration within the market range. The
Company may also undertake external benchmarking
to ensure that FAR is comparable and competitive
within the markets in which the Group operates.
(ii) Short Term Incentive Plan (‘STIP’)
STIP rewards individuals on the basis of Group
financial performance, Business Unit financial
performance and specific, non-financial individual
targets for the current year. The Group operates a
range of STIP arrangements that are designed to
meet the particular requirements of specific roles.
STIP is settled in cash. The potential quantum for
2014 was 100% of FAR for the CEO and COO/CFO
and 10% to 100% of FAR for senior executives.
(iii) Long term incentive Plan (‘LTIP’)
LTIP rewards senior executives of the Group for
driving long-term prosperity through the use of
challenging performance hurdles. LTIP is settled in
Performance Rights over shares in the Company.
The process for the review of executives’ performance is
explained in the Corporate Governance Statement.
(i) Fixed annual remuneration (FAR)
Executives may receive their FAR in a variety of forms
including cash and fringe benefits. It is intended that
the manner in which FAR is paid will be optimal for the
recipient without creating extra cost for the Group.
The FAR component of executives’ remuneration is
detailed on page 38 in this report. Cash remuneration, as
disclosed in the remuneration tables, is the remuneration
remaining after the deduction of salary sacrifice
components such as motor vehicles and superannuation
which are shown in a separate category.
Each executive has a target STIP opportunity on the
basis of the accountabilities of the role and impact on
the organisation and Operating Segment or Business Unit
performance. The maximum target bonus opportunity is
100% of FAR. In general, the STIP has three categories
of performance targets which are set for each individual
executive participating in the plan (other than the CEO
and COO & CFO) although there are some exceptions
to this structure for specific roles .
For the year ended 30 June 2014, the general categories
were as follows:
• the first category accounts for at least 30% of an
individual’s STIP potential incentive and requires the
Business Unit or specific Operating Segment to achieve
its overall profit target (Adjusted EBITDAI) for the
financial year as set by the Board;
• the second category accounts for approximately20%
of an individual’s STIP potential incentive and requires
certain non-financial KPIs or targets to be achieved for
the financial year. Such non-financial KPIs or targets
may include assessment of on-time performance in
relation to internal projects and successful delivery of
business unit initiatives designed to add value to the
core operations of the Group; and
• the third category accounts for the remaining 50%
of an individual’s STIP potential incentive and is an
overdrive payment based on 50% of the excess over
budget of actual Group profit before tax up to a limit
of the maximum target bonus opportunity.
The CEO and previously, the COO & CFO, have two
categories of performance targets:
• the first category accounts for 50% of the potential
incentive and requires the achievement of certain
non-financial KPIs or targets. Such non-financial
KPIs or targets for 2014 included transforming the
existing business model and brand, strategy and other
operational and organisational objectives; and
• the second category accounts for the remaining 50%
of the STIP potential incentive and is based on actual
Adjusted EBITDAI, Adjusted Group profit before tax
and Revenue.
As a result of the transformation program undertaken in
2013 and 2014, certain executives’ bonuses were subject
to specific, non-standard performance targets for 2014
only. Such targets were based on the final structure of
the helloworld retail networks.
helloworldlimited.com.au The balanced scorecard approach aims to align
remuneration with the key value drivers for HLO and
complement short-term financial targets. The following
chart depicts the executives’ target short term
incentive mix.
Short Term Incentive Mix – 2014
CEO and COO & CFO
50%
Executive
30%
20%
50%
50%
0%
20%
40%
60%
80% 100%
Non-financial KPIs
Business Unit Specific KPIs
Overdrive
Group Financial Performance
The use of a combination of Group profit before tax,
Operating Segment/Business Unit Adjusted EBITDAI
and non-financial targets aims to ensure that variable
reward is only available when value has been created
for shareholders and when profit is consistent with
the Group’s business plans. The RNC has discretion to
adjust short-term incentives in light of unexpected or
unintended circumstances. The STIP is a cash-settled plan
with incentives (if any) paid before 30 September each
year and the STIP is reviewed annually by the RNC.
(iii) Long term incentive plan (LTIP)
arrangements
Background
The Board adopted the Helloworld Limited Performance
Rights Plan (‘Plan’) and the Plan was approved by
Shareholders at the 2011 AGM. Under the Plan
conditional rights to acquire shares in the Company
(‘Performance Rights’) are awarded to eligible senior
executives of the Company as the LTIP component of
their remuneration for each relevant financial year.
Each Performance Right gives the holder a conditional
right to acquire one fully paid share in the Company if
applicable performance or other vesting conditions are
satisfied (or waived).
Administration and Awards made under the Plan
The Plan is administered by the Plan Committee, which is
currently the RNC. The Plan Committee determines the
number of Performance Rights to be awarded and the
amount payable by the holder of a Performance Right
on exercise. Currently, participants are not required to
pay any amount in respect of the award of Performance
Rights or on acquisition of Shares pursuant to the vesting
or conversion of Performance Rights.
Performance Criteria and Vesting
The Plan Committee, in its absolute discretion, specifies
performance or other vesting conditions that must be
satisfied for Performance Rights to vest and determines
the performance period over which any such condition
must be satisfied. Further information in respect of
the performance criteria for the Performance Rights
is contained on pages 31 to 33.
Performance Rights will not vest unless specified
performance conditions have been satisfied during
the applicable performance period (unless otherwise
determined by the Plan Committee). The Plan Committee
retains the discretion under the Plan to vary the terms of
Performance Rights by changing or waiving any applicable
performance conditions, reducing any applicable
performance period, determining a new share acquisition
date or period end and, where applicable, determining
a new first or last exercise date (at any time and in any
particular case).
Change of Control Provisions
Unless otherwise determined by the Plan Committee,
if a change of control event occurs, all of a participant’s
Performance Rights will vest even though any applicable
performance conditions may not have been satisfied at
that time. A change of control event means:
• a person acquires voting power (within the meaning of
section 610 of the Corporations Act) in more than 50%
of the Shares in the Company as a result of a takeover
bid or through a scheme of arrangement; or
• any other event (including a merger of the Company
with another company) which the Board determines in
its absolute discretion, to be a change of control event.
Lapse of Performance Rights
Unless otherwise determined by the Plan Committee, all
unvested Performance Rights held by a participant will
lapse in certain circumstances, including if:
• the participant voluntarily resigns from their
employment or is dismissed from their employment for
a reason which entitles the employer to terminate the
employment without notice; or
• any applicable performance conditions are not
satisfied, met or reached by the end of the applicable
performance period (or any extended performance
period).
29
If a participant ceases employment in various other circumstances before the end of the performance period applicable
to their unvested Performance Rights, then (unless the Plan Committee determines otherwise) only a proportion of
those Performance Rights will lapse. This proportion will be determined by reference to the fraction of the performance
period during which the employee will not be an employee.
Share trading policy
The trading of shares issued to participants under the LTIP arrangements is subject to, and conditional upon, compliance
with the Company’s employee share trading policy. The Company would consider a breach of this policy as gross
misconduct which may lead to disciplinary action and, potentially, dismissal.
Performance Rights grants
The terms and conditions of each grant of Performance Rights (PRs) under the LTIP affecting the amount of
remuneration disclosed in current or future reporting periods is shown in the table below:
GRANT NAME
2011-Tranche 1
2011-Tranche 2
2011-Tranche 3
2012-Tranche 1
2012-Tranche 2
2012-Tranche 3
2013-Tranche 1
2013-Tranche 11
2013-Tranche 2
2013-Tranche 21
2013-Tranche 3
2013-Tranche 31
Grant Date
1 October 2010
1 October 2010
1 October 2010
26 June 2012
26 June 2012
26 June 2012
26 June 2012
26 June 2012
26 June 2012
26 June 2012
26 June 2012
26 June 2012
Performance period
1 July 2010 to 30 June 2012
1 July 2010 to 30 June 2013
1 July 2010 to 30 June 2014
1 July 2011 to 30 June 2013
1 July 2011 to 30 June 2014
1 July 2011 to 30 June 2015
1 July 2012 to 30 June 2014
1 July 2012 to 30 June 2014
1 July 2012 to 30 June 2015
1 July 2012 to 30 June 2015
1 July 2012 to 30 June 2016
1 July 2012 to 30 June 2016
2013-CEO Sign-on bonus
27 August 2012
27 August 2012 to 27 August 2014
2014-Tranche 1
2014-Tranche 1
2014-Tranche 1
22 November 2013
22 November 2013
22 November 2013
1 July 2013 to 30 June 2015
1 July 2013 to 30 June 2016
1 July 2013 to 30 June 2017
Exercise
Price
Fair Value
per PR at
grant date
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$nil
$0.80
$0.80
$0.80
$0.36
$0.36
$0.36
$0.36
$0.47
$0.36
$0.47
$0.36
$0.47
$0.46
$0.34
$0.34
$0.34
% Vested
97.5%
86.3%
0%2
70.1%
0%3
0%
0%3
0%3
0%
0%3
0%
0%3
0%4
0%
0%
0%
2014-Special Performance
Incentive5
22 November 2013
1 July 2013 to 30 June 2015
$nil
$0.40
0%
1 PRs granted to R Gurney which were approved at the 2012 AGM.
2 50.5% of 2011-Tranche 3 vested after 30 June 2014 but before the date of signing this report.
3 The Performance conditions for the 2012-Tranche 2 and 2013-Tranche 1 were not met and 100% of these PRs lapsed. These PRs lapsed after
30 June 2014 but before the date of signing this report. 100% of the PRs relating to R Gurney for 2013-Tranche 2 and 2013-Tranche 3 have
now lapsed.
4 100% of the 2013-CEO Sign-on bonus is expected to vest on 27 August 2014.
5 PRs granted to R Gurney which were approved at the 2013 AGM. 100% of the 2014 special performance incentive bonus have now lapsed.
PRs awarded under the LTIP carry no dividend or voting rights. When exercisable, each PR is convertible into one
ordinary share. The Company does not have an option plan and no KMP or executives receive options.
helloworldlimited.com.au Awards made for the year ended 30 June 2011
Awards were made under the Plan for the year ended 30 June 2011 (beginning from the date of the Merger, being
1 October 2010) and no amount was paid or is payable by participants in respect of the award of Performance Rights or
on acquisition of Shares pursuant to the vesting of Performance Rights. The share price used in calculating the number
of shares awarded to participants was $0.80, which was the 5 day volume weighted average price (VWAP) of HLO on the
grant date of 1 October 2010.
The award made under the Plan for the year ended 30 June 2011 comprises 3 tranches, each with a separate
Performance Period of 2, 3 or 4 years respectively as follows:
TRANCHE
1
2
3
Proportion
of award
Performance
period length
Performance period dates for
Performance Rights for FY2011
50%
25%
25%
2 years
3 years
4 years
1 July 2010 – 30 June 2012
1 July 2010 – 30 June 2013
1 July 2010 – 30 June 2014
Performance Rights that do not meet the performance conditions will not vest except in limited circumstances such as
change of control.
Performance Conditions for Awards made for the year ending 30 June 2011
The Performance Rights granted for the year ended 30 June 2011 are subject to performance conditions linked to
growth in the Company’s Adjusted EPS1. The Adjusted EPS performance conditions are determined by reference to
cumulative basic Adjusted EPS, aggregated over the applicable performance period, measured against a specified
Adjusted EPS target. External advice was sought when establishing the LTIP and the advisors recommended that
EPS was the most appropriate performance condition to be used.
To achieve vesting, the aggregate Adjusted EPS performance for each performance period must meet or exceed the
applicable targets determined by the Plan Committee.
Minimum Adjusted EPS performance is 90% of the Adjusted EPS target pool while maximum Adjusted EPS
performance is 110% of the Adjusted EPS target pool. For the Performance Rights to vest, the aggregate Adjusted
EPS performance condition for each performance period must meet or exceed the respective targets. As set out in
the following table, 50% of the award vests at minimum Adjusted EPS performance, while 100% vests at maximum
Adjusted EPS performance with straight line vesting in between.
Target pool determined by cumulative compound
Adjusted EPS growth over the performance period
< 90% of target
90% of target
> 90% but < 110% of target
> 110% of target
Portion of grant vesting
0%
50%
Pro-rata on a straight line basis from 50% to 100%
100%
Performance conditions for 2011 – Tranche 1 were met with 97.5% of the Performance Rights vesting in 2012.
Performance conditions for 2011 – Tranche 2 were met with 86.25% of the Performance Rights vesting in 2013.
Performance conditions for 2011 – Tranche 3 were met with 50.52% of the Performance Rights vesting after 30 June
2014 but before the date of this report.
1 Adjusted EPS is EPS adjusted for significant, non-recurring and/or unusual items as approved by the RNC. Adjusted EPS is a financial measure
which is not prescribed by Australian Accounting Standards but is a measure used by the RNC to assess the vesting of performance rights.
31
Awards made for the years ending 30 June 2012, 30 June 2013 and 30 June 2014
Awards were made under the Plan for the years ending 30 June 2012, 30 June 2013 and 30 June 2014 and no amount is
to be paid or payable by participants in respect of the award of Performance Rights or on acquisition of Shares pursuant
to the vesting of Performance Rights.
Each award made under the Plan for the years ending 30 June 2012, 30 June 2013 and 30 June 2014 comprises
3 tranches, each with a separate Performance Period of 2, 3 or 4 years respectively as follows:
TRANCHE
Proportion
of award
Performance
period length
Performance period dates
for Performance Rights
granted for FY2012
Performance period dates
for Performance Rights
granted for FY2013
Performance period dates
for Performance Rights
granted for FY2014
1
2
3
33%
33%
34%
2 years
3 years
4 years
1 July 2011 – 30 June 2013
1 July 2012 – 30 June 2014
1 July 2013 – 30 June 2015
1 July 2011 – 30 June 2014
1 July 2012 – 30 June 2015
1 July 2013 – 30 June 2016
1 July 2011 – 30 June 2015
1 July 2012 – 30 June 2016
1 July 2013 – 30 June 2017
Performance Rights that do not meet the performance conditions will not vest except in limited circumstances such as
change of control.
Performance Conditions for Awards made for the years ended 30 June 2012, 30 June 2013 and 30 June 2014
The Performance Rights awarded for the years ended 30 June 2012, 30 June 2013 and 30 June 2014 are subject to the
same performance conditions as the award for the year ended 30 June 2011 i.e. growth in the Company’s Adjusted EPS.
The Adjusted EPS performance conditions are determined by reference to cumulative basic Adjusted EPS, aggregated
over the applicable performance period, measured against a specified Adjusted EPS target.
To achieve vesting, the aggregate Adjusted EPS performance for each performance period must meet or exceed the
applicable targets determined by the Plan Committee.
As set out in the table on page 31 minimum Adjusted EPS performance is 90% of the EPS target while maximum EPS
performance is 110% of the Adjusted EPS target. For the Performance Rights to vest, the aggregate Adjusted EPS
performance condition for each performance period must meet or exceed the respective targets.
Performance conditions for 2012 – Tranche 1 were met with 70.09% of the Performance Rights vesting in 2013.
Performance conditions for 2012 Tranche 2 and 2013 Tranche 1- were not met with all Performance Rights lapsing after
30 June 2014 but before the date of this report.
Awards made in relation to the former CEO sign-on bonus
Awards were made under the Plan to R Gurney as a ‘sign-on bonus’ following his appointment as Managing Director and
Chief Executive Officer effective 27 August 2012. No amount is to be paid or is payable by R Gurney in respect of the
award of Performance Rights or on acquisition of Shares pursuant to the vesting of Performance Rights. The vesting
date of the Performance Rights is the second anniversary of R Gurney’s commencement date, that is, 27 August 2014.
Performance Conditions for Awards made in relation to the former CEO sign-on bonus
The Performance Rights awarded to the CEO as his sign-on bonus are subject to a time-based vesting condition with
the vesting date being the second anniversary of his commencement date with the Company, that is, on 27 August
2014. The Performance Rights will lapse if, prior to the vesting date, the CEO voluntarily resigns from his employment
and completes the contractual notice period or his employment contract is terminated (unless the Plan Committee
determines otherwise). No performance conditions apply to these Performance Rights as they were granted as an
incentive for the CEO to join the company. Mr Gurney resigned as CEO and director on 28 March 2014 and continues
to be employed by the company due to the notice period in his contract. His continued employment means that he is
expected to meet the vesting conditions for the sign-on-bonus on 27 August 2014.
helloworldlimited.com.au Awards made to the former CEO – Special Performance
Incentive
Awards made in relation to the appointment of the new
CEO on 28 March 2014
An award was made under the plan for the year ended
30 June 2014 for the CEO Special Performance Bonus.
No amount was paid or is payable in respect of the
award of Performance Rights or on acquisition of
Shares pursuant to the vesting of these Performance
Rights. The share price used in calculating the number of
shares awarded was $0.40, which is the allocation price
determined by the Plan Committee. The award covers
the period 1 July 2013 to 30 June 2015.
Performance Rights that do not meet the performance
conditions will not vest unless those performance
conditions are met, except in limited circumstances such
as change in control.
Performance Conditions for Awards made in relation to
the CEO Special Performance Incentive
Performance Rights awarded for the CEO Special
Incentive Bonus for the year ended 30 June 2014 are
subject to performance conditions linked to Company’s
consolidated profit after income tax for FY15 as
reported in the Company’s audited consolidated income
statement for FY15, subject to any adjustment in
relation to exceptional items as determined by the Plan
Committee in its discretion (“PAT”). For the purposes of
this performance condition, the Plan Committee has set
threshold and maximum targets, having regard to the
business plan and strategy approved by the Board.
Subject to shareholder approval, at the 2014 AGM the
CEO will be awarded Performance Rights to the value of
40% of FAR deliverable through the Helloworld Limited
Long Term Incentive Plan on the following terms:
• number of PRs to be calculated as 40% of FAR
divided by the HLO share price on a date determined
by the Board;
• vesting in three equal, annual instalments at no cost to
the CEO; and
• performance hurdle of Adjusted EPS growth of 10%
per annum for each of the years ending 30 June 2015,
30 June 2016 and 30 June 2017.
(f) Use of remuneration consultants
No remuneration consultants were appointed in relation
to the year ended 30 June 2014.
(g) Voting and comments made at
the Company’s 2013 Annual General
Meeting
More than 98% of the votes cast at the 2013 AGM
were in favour of the resolution for adoption of the
Remuneration Report. The company did not receive any
specific feedback at the AGM or throughout the year on
its remuneration practices.
To achieve vesting, the FY15 PAT must meet or exceed
the threshold target determined by the Plan Committee.
(h) Details of remuneration
1,000,000 PRs (being 40% of the grant) will vest if the
threshold target PAT is satisfied, while 2,500,000 PRs
(being 100% of the grant) will vest if the maximum target
is achieved or exceeded, with straight line vesting in
between.
PAT
Portion of PRs vesting
Below threshold target
At threshold target
0%
40%
Between threshold and
Pro-rata on a straight line basis
maximum targets
from 40% to 100%
Mr Gurney resigned as CEO and director on 28 March
2014 and as a result all Performance Rights under this
award have lapsed.
Details of the remuneration of the Directors and other
KMP of the Group (as defined in AASB 124 Related Party
Disclosures) are set out in the following tables.
Non-monetary benefits
Non-monetary benefits, as disclosed in the remuneration
tables, include salary sacrifice components such as
motor vehicles, memberships of appropriate professional
associations and reportable fringe benefits under Fringe
Benefits Tax legislation.
Directors’ and officers’ liability insurance has not been
included in the remuneration since it is not possible to
determine an appropriate allocation basis.
33
Remuneration of Directors and KMP of the Group
Table 1: Remuneration for the year ended 30 June 2014
Short term
benefits
Long term
benefits
Post-employment
benefits
Salary
and
fees
$
STIP
cash
bonus1
$
Other
benefits
$
Long
service
leave2
$
LTIP share
based
payment3
$
Pension
and Super-
annuation
benefits4
$
Termination
benefits
$
Proportion of
remuneration
performance
related5
$
Total
$
NON-EXECUTIVE
DIRECTORS
S Bennett
A Cummins
T Dery (Chairman)
A John6
B Johnson
J M Millar
Sub-total
Non-executive Directors
OTHER KMP
E Gaines7,8
CEO & Executive
Director
R Carstensen10
GM Air Services
P Egglestone9
Head of Wholesale
G Leighton9
CEO New Zealand
R Gurney7
Former CEO &
Executive Director
Sub-total
Other KMP
100,686
100,686
207,225
110,000
109,840
114,417
742,854
–
–
–
–
–
–
–
646,404
400,000
516,740
326,600
287,474
60,000
–
–
–
–
–
–
–
–
–
–
322,989
100,500
4,466
821,283
284,750
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,314
9,314
17,775
–
10,160
10,583
57,146
–
–
–
–
–
–
–
110,000
110,000
225,000
110,000
120,000
125,000
800,000
–
–
–
–
–
–
–
4,669
36,768
17,775
– 1,105,616
39%
2,981
(6,116)
17,775
11,595
(3,452)
17,775
(3,268)
–
–
–
–
857,980
37%
373,392
15%
424,687
23%
79,500
17,775
– 1,203,308
30%
2,594,890 1,171,850
4,466
19,245
103,432
71,100
– 3,964,983
TOTAL
3,337,744 1,171,850
4,466
19,245
103,432
128,246
– 4,764,983
helloworldlimited.com.au Notes to Table 1
1. Short Term Incentive Plan (STIP) cash bonus amounts are those earned during the current financial year and provided for in the current year’s
financial statements. These amounts were settled in cash after 30 June 2014.
2. Represents the movement in the provision for long service leave entitlements for the period in relation to that individual KMP as recorded in
the financial statements of the Group according to AASB 119 Employee Benefits. Accordingly, amounts in this component of remuneration
can be negative, particularly where long service leave is taken during the year.
3. Represents the share-based payments expense for the period in relation to that individual KMP as recorded in the financial statements of the
Group according to AASB 2 Share-based Payment. Share-based payments arise as a result of the grant of Performance Share Rights to KMPs
under the Group’s Long Term Incentive Plan (LTIP).
4. Amounts disclosed as Pension and Superannuation Benefits represent the proportion of remuneration paid to complying Superannuation
funds in accordance with legislative requirements, individual contract terms or structuring elections made by directors or executives. Where
amounts in other component columns in the Remuneration Report are shown on an accruals basis and these will attract corresponding future
Pension or Superannuation contributions, these accrued Pension or Superannuation elements are added to the gross accrual amounts shown
under the other respective components of the Remuneration Report.
5. The proportion of remuneration that is performance based is calculated as the sum of the STIP cash bonus, LTIP share-based payment and
other bonus amounts included in other benefits as a proportion of total remuneration.
6. Amounts disclosed in the table as Salary and fees in relation to A John were paid to Qantas Airways Limited rather than to A John and therefore
did not attract a superannuation contribution.
7. R Gurney resigned as CEO and as a director of the Group on 28 March 2014 and E Gaines was appointed as CEO on that date. R Gurney
continues to be employed by the group until September 2014 as he is serving his contracted notice period.
8. An entity within the consolidated Group has an amount of $96,028 receivable from E Gaines in relation to a previous share option plan. This
bears interest at 5.95% being the benchmark interest rate for Fringe Benefits Tax purposes as published by the Australian Taxation Office
(ATO). The amount is only repayable on sale of certain shares associated with the plan which are currently subject to escrow and transfer
restrictions
9. G Leighton and P Egglestone became KMP on 1 July 2013; both were employed by the Group at this time.
10. The STIP bonus shown for R Carstensen includes an amount of $183,000 which relates to the June 2013 STIP bonus.
35
Table 2: Remuneration for the year ended 30 June 2013
Short term
benefits
Long term
benefits
Post-employment
benefits
Salary
and
fees
$
STIP
cash
bonus1
$
Non-
monetary
benefits
$
Long
service
leave2
$
LTIP share
based
payment3
$
Pension
and Super-
annuation
benefits4
$
Termination
benefits
$
Proportion of
remuneration
performance
related5
$
Total
$
100,917
100,917
209,225
110,000
105,459
55,000
114,679
38,226
834,423
–
–
–
–
–
–
–
–
–
654,431
623,125
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,083
9,083
16,470
-
4,541
-
10,321
3,440
52,938
–
–
–
–
–
–
–
–
–
110,000
110,000
225,695
110,000
110,000
55,000
125,000
41,666
887,361
–
–
–
–
–
–
–
–
–
–
264,250
14,042
– 1,555,848
57.0%
574,329
599,467
22,311
1,455
76,366
16,470
– 1,290,398
52.4%
341,409
–
529,170
226,400
–
–
30,750
(15,739)
16,470
1,465
55,492
34,497
–
–
–
372,890
0.0%
847,024
33.3%
264,606
0.0%
210,076
205,359
–
–
17,660
51,696
(23,061)
8,235
15,742
2,878
460
12,353
108,253
345,045
0.1%
287,325
100,000
321,049
45,190
–
–
11,397
38,183
16,470
9,206
44,431
27,749
–
–
453,375
30.5%
447,625
20.0%
205,188
–
28,309
(688)
(86,477)
4,118
751,271
901,721
0.0%
3,328,336 1,594,182
84,022
108,159
353,905
150,404
859,524 6,478,532
NON-EXECUTIVE
DIRECTORS
S Bennett
A Cummins
T Dery (Chairman)
A John6
B Johnson7
A MacKenzie8
J M Millar
P Spathis9
Sub-total
Non-executive Directors
OTHER KMP
R Gurney
CEO & Executive
Director
E Gaines10
COO & CFO &
Executive Director
M Londregan11
Group GM Wholesale
R Carstensen
GM Air Services
G Elliott12
Group GM Online
D Hughes13
GM QBT
A Slark15
GM Corporate
Affairs
M Thompson15
CEO Travelscene
American Express
P Lacaze14
Former CEO &
Executive Director
Sub-total
Other KMP
TOTAL
4,162,759 1,594,182
84,022
108,159
353,905
203,342
859,524 7,365,893
helloworldlimited.com.au Notes to Table 2
1. Short Term Incentive Plan (STIP) cash bonus amounts are those earned during the current financial year and provided for in the current year’s
financial statements. These amounts were settled in cash after 30 June 2013.
2. Represents the movement in the provision for long service leave entitlements for the period in relation to that individual KMP as recorded in
the financial statements of the Group according to AASB 119 Employee Benefits. Accordingly, amounts in this component of remuneration
can be negative, particularly where long service leave is taken during the year.
3. Represents the share-based payments expense for the period in relation to that individual KMP as recorded in the financial statements of the
Group according to AASB 2 Share-based Payment. Share-based payments arise as a result of the grant of Performance Share Rights to KMPs
under the Group’s Long Term Incentive Plan (LTIP).
4. Amounts disclosed as Pension and Superannuation Benefits represent the proportion of remuneration paid to complying Superannuation
funds in accordance with legislative requirements, individual contract terms or structuring elections made by directors or executives. Where
amounts in other component columns in the Remuneration Report are shown on an accruals basis and these will attract corresponding future
Pension or Superannuation contributions, these accrued Pension or Superannuation elements are added to the gross accrual amounts shown
under the other respective components of the Remuneration Report.
5. The proportion of remuneration that is performance based is calculated as the sum of the STIP cash bonus and LTIP share-based payment
amounts as a proportion of total remuneration.
6. Amounts disclosed in the table as Salary and fees in relation to A John were paid to Qantas Airways Limited rather than to A John and therefore
did not attract a superannuation contribution.
7. Amounts disclosed in the table as Salary and fees in relation to B Johnson were paid for a period from 1 July 2012 to 31 December 2012 to
Qantas Airways Limited rather than to B Johnson and therefore did not attract a superannuation contribution. From 1 January 2013, director’s
fees were paid directly to B Johnson and superannuation contributions were paid as per legislative requirements.
8. A MacKenzie resigned as a Director on 31 December 2012. Amounts disclosed in the table as Salary and fees in relation to A MacKenzie were
paid to Europe Voyager N.V. rather than to A MacKenzie and therefore did not attract a superannuation contribution.
9. Director’s fees for P Spathis covered the period from 1 July 2012 until 28 November 2012 due to resignation.
10. An entity within the consolidated Group has an amount of $89,775 receivable from E Gaines in relation to a previous share option plan. This
bears interest at 6.45% being the benchmark interest rate for Fringe Benefits Tax purposes as published by the Australian Taxation Office
(ATO). The amount is only repayable on sale of certain shares associated with the plan which are currently subject to escrow and transfer
restrictions.
11. M Londregan resigned and left the Group on 24 June 2013.
12. G Elliott resigned and left the Group on 30 October 2012.
13. D Hughes resigned and left the Group on 31 March 2013.
14. P Lacaze resigned as a director of Helloworld Limited on 27 August 2012 and continued with the Group as an employee until 30 September 2012.
15. A Slark and M Thompson are no longer KMP from 1 July 2013, their employment with the Group continues.
37
(i) Service agreements
Remuneration and other terms of employment for KMP are formalised in continuing-term contracts of employment.
These contracts specify the components of remuneration, benefits and notice periods. All contracts may be terminated
by either party subject to notice periods and subject to termination payments or benefits as detailed in table 3 below:
Table 3: Service agreements with KMPs
KMP
E Gaines3
CEO & Executive Director
R Carstensen
GM Air Services
P Egglestone
Head of Wholesale
G Leighton
CEO New Zealand
R Gurney3
Former CEO & Executive Director
Notes to Table 3:
Base salary
including
superannuation1
Notice
period to
be given
by KMP
Notice
period to
be given by
the company
$750,000
6 months
6 months
$546,305
3 months
3 months
$300,000
3 months
3 months
$312,180
3 months
3 months
$850,000
6 months
6 months
Termination payments
or benefits payable
if termination
is by the company2
In accordance with normal
statutory entitlement
In accordance with normal
statutory entitlement
In accordance with normal
statutory entitlement
In accordance with normal
statutory entitlement
In accordance with normal
statutory entitlement
1 Base salaries quoted are for the year ended 30 June 2014.
2 Certain termination payments or benefits may not be payable in the case of summary dismissal or circumstances similar to that which would
allow the Company to terminate employment without notice. There are no set end dates or termination dates under any of the contracts of
employment in the table.
3 R Gurney resigned on 28 March 2014 with E Gaines being appointed as CEO on that date.
(j) Details of remuneration: share-based compensation and bonuses
The terms and conditions of each grant of Performance Rights (PRs) affecting remuneration in the current or a future
period are detailed in the overview of executive remuneration policy and framework.
Details of PRs over ordinary shares in the Company provided as remuneration to each Director and KMP, details of
amounts expensed and shown as remuneration in the remuneration tables and details of the percentage of potential
bonuses earned during the year are set out on pages 39 to 42.
helloworldlimited.com.au Table 4: Details of PRs for the year ended 30 June 2014
Number
of PRs
granted
during
this year
Value of PRs
expensed
& shown as
remuneration
during the
year2
Value
of PRs
at grant
date1
Maximum
total value
of grant
yet to
vest3
Number
of PRs
actually
vested
during the
year4
Number
of PRs
lapsed
during the
year
Value
of PRs
that lapsed
at lapse
date
Number
of PRs at
1 July
2014
–
–
–
369,162
–
–
–
$125,515
($6,845)
($3,748)
$2,176
$45,185
–
$8,221
$20,311
$80,330
32,344
46,606
–
–
23,503
33,867
–
12,938
21,167
–
12,440
18,812
–
5,156
19,891
–
–
$5,196
$18,619
–
–
37,500
135,002
201,499
369,162
3,747
14,453
–
$3,776
$13,529
–
27,250
98,103
146,423
2,062
9,033
–
1,983
8,028
–
$2,078
$8,456
–
$1,998
$7,515
–
45,000
61,314
91,514
43,269
54,494
81,334
–
–
–
–
–
–
–
–
–
($4,974)
($2,723)
$1,581
–
$5,974
$14,759
($2,738)
($1,702)
$988
($2,633)
($1,513)
$878
–
$3,734
$9,225
–
$3,318
$8,198
638,298
815,217
– ($108,000)
– $187,500
–
$15,625
–
–
638,298 $178,723
–
–
–
815,217
– 2,500,000 $1,000,000
–
–
– 2,500,000 $700,000
–
Number
of PRs at
30 June
2013
DIRECTOR OR KMP
NON-EXECUTIVE DIRECTORS
E Gaines5 CEO & Executive Director
75,000
201,499
201,499
–
2011 Grant
2012 Grant
2013 Grant
2014 Grant
R Carstensen GM Air Services
2011 Grant
2012 Grant
2013 Grant
54,500
146,423
146,423
P Egglestone Head of Wholesale
2011 Grant
2012 Grant
2013 Grant
60,000
91,514
91,514
G Leighton CEO New Zealand
2011 Grant
2012 Grant
2013 Grant
57,692
81,334
81,334
R Gurney5 Former CEO & Executive Director
2013 Grant6
Sign-on Grant
Special Performance
Incentive6
Notes to Table 4
–
–
–
–
–
–
–
–
–
–
–
1 Calculated in accordance with AASB 2 Share-based Payment. The assessed value at grant date of PRs granted to the individual is allocated
by tranche evenly over the period from grant date to vesting date and the amount is included in the remuneration tables above. Fair values at
grant date are calculated taking into account the share price on grant date and the exercise price.
2 Calculated in accordance with AASB 2 Share-based Payment. Shown as a component of current year remuneration (see table 1).
3 The maximum value of PRs yet to vest has been determined as the amount of the grant date fair value of the PRs that is yet to be expensed (or
shown as remuneration) in accordance with AASB 2 Share-based Payment.
4 The Performance conditions for the 2011 – Tranche 3 was met with 50.5% vesting. These PRs vested after 30 June 2014 but before the date
of signing this report. The Performance conditions for the 2012 – Tranche 2 and 2013 – Tranche 1 were not met and these PRs lapsed after
30 June 2014 but before the date of signing this report.
5 R Gurney resigned on 28 March 2014 with E Gaines being appointed as CEO on that date.
6 The performance conditions for the 2013 Grant and the Special Performance Incentive were not met due to the resignation of the CEO with
100% of the grant lapsing.
39
Table 5: Details of PRs for the year ended 30 June 2013
Number
of PRs at
30 June
2012
Number
of PRs
granted
during
this year
Value of PRs
expensed
& shown as
remuneration
during the
year2
Value
of PRs
at grant
date1
Maximum
total value
of grant
yet to
vest3
Number
of PRs
actually
vested
during the
year
Number
of PRs
lapsed
during the
year
Value
of PRs that
lapsed
at lapse
date
Number
of PRs at
1 July
2013
DIRECTOR OR KMP
NON-EXECUTIVE DIRECTORS
P Lacaze5 Former CEO & Executive Director
2011 Grant
375,000
–
–
($86,477)
–
182,813
192,187
$72,984
–
R Gurney CEO & Executive Director
2012 Grant
2013 Grant
Sign-on Grant
–
–
–
–
638,298
815,217
–
$300,000
$375,000
–
$108,000
$156,250
–
$192,000
$218,750
–
–
–
–
–
–
–
–
–
–
638,298
815,217
–
–
–
–
–
–
–
–
–
–
–
–
E Gaines CFO/COO & Executive Director
2011 Grant
2012 Grant
2013 Grant
150,000
201,499
201,499
M Londregan6 Group GM Wholesale
2011 Grant
2012 Grant
2013 Grant
68,250
117,541
117,541
R Carstensen GM Air Services
2011 Grant
2012 Grant
2013 Grant
G Elliott7 Group GM Online
2011 Grant
2012 Grant
2013 Grant
D Hughes8 GM QBT
2011 Grant
109,000
146,423
146,423
100,000
146,347
146,347
73,750
–
A Slark GM Corporate Affairs
75,000
100,750
100,750
2011 Grant
2012 Grant
2013 Grant
–
–
–
M Thompson CEO Travelscene AmericanExpress
–
–
–
2011 Grant
2012 Grant
2013 Grant
85,471
117,745
117,745
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$13,284
$36,968
$26,114
$8,000
$28,411
$46,425
73,125
–
–
1,875
–
–
$656
–
–
75,000
201,499
201,499
($15,739)
–
–
-
–
–
33,272
–
–
34,978
117,541
117,541
$12,259
$41,139
$41,139
–
–
–
$9,653
$26,863
$18,976
$5,813
$20,646
$33,736
53,138
–
–
1,362
–
–
$477
–
–
54,500
146,423
146,423
($23,061)
–
–
–
–
–
48,750
–
–
51,250
146,347
146,347
$21,963
$62,929
$62,929
–
–
–
$460
$2,622
35,953
8,741
$3,685
29,056
$6,642
$18,484
$13,057
$4,000
$14,206
$23,213
$7,569
$21,602
$15,260
$4,245
$16,602
$27,128
36,563
–
–
41,668
–
–
937
–
–
1,068
–
–
$328
–
–
$374
–
–
37,500
100,750
100,750
42,735
117,745
117,745
Notes to Table 5
1 Calculated in accordance with AASB 2 Share-based Payment. The assessed value at grant date of PRs granted to the individual is allocated
evenly over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date
are calculated taking into account the share price on grant date and the exercise price.
2 Calculated in accordance with AASB 2 Share-based Payment. Shown as a component of current year remuneration (see table 2).
3 The maximum value of PRs yet to vest has been determined as the amount of the grant date fair value of the PRs that is yet to be expensed (or
shown as remuneration) in accordance with AASB 2 Share-based Payment.
4 The performance conditions for the 2011 – Tranche 2 and the 2012 Tranche 1 PRs were met with 86.3% and 70.9% vesting respectively. These
PRs vested after 30 June 2013.
5 P Lacaze left the Group on 30 September 2012 and was replaced by R Gurney.
6 M Londregan left the Group on 24 June 2013.
7 G Elliott left the Group on 30 October 2012.
8 D Hughes left the Group on 31 March 2013.
helloworldlimited.com.au Shares provided on vesting of Performance Rights
Details of ordinary shares in the Company provided as a result of the exercise of Performance Rights to each eligible
director of Helloworld Limited and other KMP of the Group are set out below. For each Performance Right that vested
one Helloworld Limited ordinary share was issued.
Table 6: Shares issued during the year on vesting of Performance Rights
NAME
DIRECTORS
Date of vesting of
Performance Rights1
Number of ordinary
shares issued on
vesting of the
Performance Rights
Value at share
issue date2
E Gaines
CEO & Executive Director
27 August 2013
78,950
$33,949
OTHER KMP
R Carstensen
GM Air Services
P Egglestone
Head of Wholesale
G Leighton
CEO New Zealand
Notes to Table 6
27 August 2013
27 August 2013
27 August 2013
57,370
34,105
31,252
$24,669
$14,665
$13,438
1 The Performance Rights vested on 27 August 2013 with the ordinary shares issued on 18 September 2013 in accordance with the Plan Rules.
2 Based on the share price at issue date of 18 September 2013.
No amounts were paid by the directors or other KMP on the vesting of Performance Rights and the issue of ordinary
shares in Helloworld Limited.
No amounts are unpaid on the shares issued.
41
Bonuses
For each cash bonus (STIP) included in the remuneration tables, the percentages of the available bonus that was paid, or
that vested, in the financial year, and the percentage that was forfeited because the person did not meet the service and
performance criteria is set out below.
Table 7: Details of Bonuses
KMP
E Gaines
CEO & Executive Director
R Carstensen
GM Air Services
P Egglestone2
Head of Wholesale
G Leighton2
R Gurney
CEO New Zealand
Former CEO & Executive Director
% of potential
bonus earned
during the year
% of potential
bonus forfeited
during the year1
2013
2014
2013
2014
2014
2014
2013
2014
100%
59%
42%
60%
50%
100%
100%
45%
0%
41%
58%
40%
50%
0%
0%
55%
Notes to Table 7
1 The percentage of the potential bonus that was forfeited as a result of Group profit, Business Unit performance or personal targets not being
achieved.
2 G Leighton and P Egglestone became KMP on 1 July 2013; both were employed by the Group at this time.
The relative proportion of remuneration that is linked to performance and that which is fixed are as follows:
Table 8: Analysis of remuneration
KMP
E Gaines
CEO & Executive Director
R Carstensen
GM Air Services
P Egglestone3
Head of Wholesale
G Leighton3
R Gurney
CEO New Zealand
Former CEO & Executive Director
Fixed
remuneration
At risk
STIP2
At risk
LTIP1
2013
2014
2013
2014
2014
2014
2013
2014
48%
61%
67%
63%
85%
77 %
43%
70%
46%
36%
27%
38%
16%
24%
40%
24%
6%
3%
6%
-1%
-1%
-1%
17%
6%
Notes to Table 8
1 Since long term incentives are provided exclusively by way of Performance Rights, the percentages disclosed also reflect the value of the
remuneration consisting of Performance Rights, based on the value of Performance Rights expensed during the year. Where applicable, the
expense includes negative amounts for expenses reversed during the year due to a failure to satisfy the vesting conditions.
Includes STIP cash bonus and other short term bonuses.
2
3 G Leighton and P Egglestone became KMP on 1 July 2013; both were employed by the Group at this time.
helloworldlimited.com.au
(k) Equity investments held by KMP
The number of shares in the Company held during the financial year by each Director and other KMP of the Group,
including their personally related parties, are set out below:
Table 9: Details of Shareholdings 2014
DIRECTOR OR KMP
S Bennett
A Cummins
T Dery
A John
B Johnson
J M Miller
E Gaines
R Carstensen
P Egglestone1
G Leighton1
M Thompson2
A Slark2
R Gurney
TOTAL
Director
Director
Chairman
Director
Director
Director
CEO & Executive Director
GM Air Services
Head of Wholesale
CEO New Zealand
Head of Strategic Partnerships
GM Corporate Affairs
Former CEO & Executive Director
Number of
Shares at
30 June 2013
Received
on the vesting
of PRs
Other
changes during
the year
Number of
Shares at
1 July 2014
50,000
952,998
–
–
–
40,000
1,121,423
434,337
–
–
618,167
36,563
–
3,253,488
–
–
–
–
–
–
78,950
57,370
34,105
31,252
–
–
–
201,677
–
–
–
–
–
–
–
–
449,765
409,324
(618,167)
(36,563)
–
204,359
50,000
952,998
–
–
–
40,000
1,200,373
491,707
483,870
440,576
–
–
–
3,659,524
1 Designated KMPs during the year. The net change does not represent an acquisition of shares.
2 A Slark and M Thompson are no longer KMP from 1 July 2013. The net change does not represent a disposal of shares.
(l) Loans to KMP
The Group has not made any loans to directors of HLO or other KMP including their close family members and entities
related to them during the period.
(i) Aggregates for KMP
Balance at
the start of
the year
89,755
Interest paid
and payable
for the year
6,273
Interest
not
charged
–
Repayments
made during
the year
–
Balance at
the end of
the year
96,028
Number in
group at the end
of the year
1
2014
In 2014 and 2013, there were no loans to individuals that exceeded $100,000 at any time.
(m) Other transactions with KMP
There were no other transactions with KMP.
43
AUDITOR
INDEPENDENCE
AND NON-AUDIT
SERVICES
The Directors received the declaration of independence
on page 45 from PricewaterhouseCoopers, the
auditor of HLO. This declaration confirms the auditor’s
independence and forms part of the Directors’ Report.
Non Audit Services
During the year PricewaterhouseCoopers, has performed
certain other services in addition to its statutory
duties. Consistent with written advice provided by the
Audit Committee, the Directors have resolved and are
satisfied that the provision of these non-audit services
is compatible with, and did not compromise, the general
standard of independence of auditors imposed by the
auditor independence requirements of the Corporations
Act 2001. The reasons for this are that all non-audit
services were subject to the corporate governance
procedures adopted by the Company and have been
reviewed by the Audit Committee to ensure they do not
impact the integrity and objectivity of the auditor. The
non-audit services provided do not undermine the general
principles relating to auditor independence, as set out in
APES 110 Codes of Ethics for Professional Accountants,
as they did not involve reviewing or auditing the auditor’s
own work, acting in a management or decision-making
capacity for the Company, acting as an advocate for the
Company or jointly sharing risks and rewards.
The lead auditor’s independence declaration, as required
under section 307C of the Corporations Act 2001, is set
out on page 45 and forms part of the Directors’ Report
for the financial year ended 30 June 2014. Details of the
amounts paid to PricewaterhouseCoopers, for audit and
non-audit services are set out in note 21 of the Financial
Statements on page 99 of the Financial Report.
Rounding
The amounts contained in this Directors’ Report and in
the Financial Report have been rounded to the nearest
$1,000 (where rounding is applicable) under the option
available to the Company under Australian Securities and
Investments Commission (ASIC) Class Order 98/100. The
Company is an entity to which the Class Order applies.
Made in accordance with a resolution of the Directors.
TOM DERY
Chairman, Helloworld Limited
Sydney, 27 August, 2014
helloworldlimited.com.au
AUDITOR’S
INDEPENDENCE
DECLARATION
As lead auditor for the audit of Helloworld Limited for the year ended 30 June 2014, I declare that
to the best of my knowledge and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001
in relation to the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Helloworld Limited and the entities it controlled during the period.
Kristin Stubbins
Partner
PricewaterhouseCoopers
Sydney
27 August 2014
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation
45
CORPORATE
GOVERNANCE
STATEMENT
Overview
The Board of Helloworld Limited (HLO or Company)
governs the business on behalf of shareholders as
a whole with the prime objective of protecting and
enhancing shareholder value. The Board is committed
to, and ensures that, the executive management runs
the Group in accordance with the highest level of ethics
and integrity. It continually reviews the governance
framework and practices to ensure it fulfils its corporate
governance obligations.
This statement outlines the main corporate governance
practices employed by the Board of HLO. HLO endorses
the ASX Corporate Governance Principles and
Recommendations with 2010 Amendments (2nd Edition)
released in June 2010 by the ASX Corporate Governance
Council (ASX CGP) and where it has not adopted a
particular recommendation, a detailed explanation is
provided in the body of this document.
1 Laying solid foundations for
management and oversight
The relationship between the Board and senior
management is critical to the Company’s long term
success. The Board is responsible for the performance
of the Company in both the short and longer term and
seeks to balance sometimes competing objectives in the
best interests of the Group as a whole. The key aims of
the Board are to enhance the interests of shareholders
and other key stakeholders and to ensure the Company
is properly managed.
Day to day management of the Company’s affairs and
the implementation of the corporate strategy and policy
initiatives are formally delegated by the Board to the
Chief Executive Officer (CEO) and senior executives.
The responsibilities of the Board as a whole, the Chairman
and individual Directors are set out in the Company’s
Board Charter and are consistent with those set out in
ASX CGP 1. A copy of the Board Charter is available from
the Corporate Governance section of the Company’s
website at www.helloworldlimited.com.au.
To ensure that Non-Executive Directors clearly
understand the requirements of their role, formal letters
of appointment are provided to them. The content of
the appointment letter is consistent with that set out in
ASX CGP 1. The majority of the Non-Executive Directors
have extensive knowledge of the whole or part of the
Company’s operations. New Non-Executive Directors
are provided with a pack of information and documents
relating to the Company including the Constitution, group
structure, financial statements and the various Board
policies and charters.
To ensure that Executive Directors clearly understand the
requirements of the role, service contracts and formal job
descriptions are provided to them, the content of which is
consistent with ASX CGP 1.
Senior Executive Performance
The CEO undertakes an annual review of the performance
of her direct reports against key performance indicators
and provides a report to the Remuneration and
Nominations Committee for further consideration. The
Senior Executive review for the year ended 30 June
2014 was undertaken in August/September 2014 in
accordance with this process.
The Chairman undertakes an annual review of the
performance of the CEO against key performance
indicators and provides a report to the Remuneration
and Nominations Committee for further consideration.
The CEO review for the year ended 30 June 2014
was undertaken in August 2014 in accordance with
this process.
2 Structure of the Board
Board composition
The Directors determine the composition and size of the
Board in accordance with the Company’s Constitution.
The Constitution empowers the Board to set upper and
lower limits with the number of Directors not permitted
to be less than three. There are currently seven Directors
appointed to the Board. The skills, experience and
expertise of each Director and their period of office at
the date of the 2014 Annual Report are set out in the
Directors’ Report on pages 10 to 14.
helloworldlimited.com.au Director Independence
As at 30 June 2014, based on the definition of
independence published in the ASX CGP, only two
Directors, Chairman Tom Dery and James Millar,
are deemed Independent Directors. The remainder
of the Board is not technically independent for the
following reasons:
• Adrian John is an executive of Qantas, the ultimate
holding company of QH Tours Ltd, a substantial
shareholder of HLO;
• Brett Johnson was until 31 December 2012 an
executive of Qantas and, from 1 January 2013 has been
paid a retainer by Qantas and does, when requested
undertake certain work unrelated to HLO. Qantas
is the ultimate holding company of QH Tours Ltd, a
substantial shareholder of HLO and has a material
business relationship with HLO as a supplier of product
and a customer for distribution services;
• Andrew Cummins is Chairman of CVC Australia. CVC
has an indirect majority interest in Europe Voyager NV,
a substantial shareholder of HLO;
• Stephen Bennett has held senior management
positions with UBS Australia Holdings Limited (UBS
AHL) and previously acted as a consultant to UBS AHL.
UBS AHL is a substantial shareholder of HLO; and
• Elizabeth Gaines is CEO of the Company.
As Mr Bennett no longer has any relationship or
association with UBS AHL he now satisfies the definition
of independence published in the ASX CGP and is deemed
independent from 1 July 2014.
Independent Decision Making
A majority of the Board is not independent and the
Company recognises that this is a departure from
Recommendation 2.1 of the ASX CGP. QH Tours Ltd and
Europe Voyager NV have each nominated members to
the current Board. Those nominees bring to the Board
the requisite skills which are complementary to those
of the other Directors and enable them to adequately
discharge their responsibilities as non-executive
Directors. All Directors bring independent judgement
to bear on their decisions.
The materiality thresholds used to assess director
independence are set out in the Board Charter. The Board
believes that the interests of the shareholders are best
served by:
• the current composition of the Board which is regarded
as balanced with a complementary range of skills,
diversity and experience as detailed in the Directors’
Report; and
• the Independent Directors providing an element of
balance as well as making a considerable contribution
in their respective fields of expertise.
The following measures are in place to ensure the
decision making process of the Board is subject to
independent judgement:
• a standard item on each Board Meeting agenda
requires Directors to focus on and declare any conflicts
of interest in addition to those already declared;
• Directors are permitted to seek the advice of
independent experts at the Company’s expense, subject
to the approval of the Chairman;
• all Directors must act at all times in the interests of the
Company; and
• Directors meet independently of executive management
on a regular basis.
Adoption of these measures ensures that the interests of
shareholders, as a whole, are pursued and not jeopardised
by a lack of independence.
Remuneration and Nominations Committee
The Remuneration and Nominations Committee’s specific
responsibilities are set out in the Committee’s charter,
which is available in the Corporate Governance section of
the Company’s website.
The Committee is chaired by Mr Andrew Cummins, a non-
executive director of HLO.
The terms of reference, role and responsibility of
the Remuneration and Nominations Committee are
consistent with ASX CGP 2 except that, due to the small
number of Independent Directors, the Committee does
not have a majority of Independent Directors and the
Chairman is not an independent director. The Chairman
and members are however, considered to be the best
qualified to serve their respective roles on the Committee
given their background and experience.
47
More information regarding the Committee is set out on
page 51 in this Corporate Governance Statement under
the heading ‘Remunerating fairly and responsibly’.
3 Ethical and responsible decision
making
The Board seeks to ensure that collectively its
membership represents an appropriate balance between
Directors with experience and knowledge of the Company
and Directors with an external or fresh perspective.
It reviews the range of expertise of its members on a
regular basis and seeks to ensure that it has operational
and technical expertise relevant to the operations of
the Company.
Directors are nominated, appointed and re-elected
to the Board in accordance with the Board’s policy on
these matters set out in the Charter, the Company’s
Constitution and the ASX Listing Rules. In considering
appointments to the Board, the extent to which the skills
and experience of potential candidates complement
those of the Directors in office is considered.
Board performance
The Board undertakes an annual self-assessment of
its collective performance and the performance of its
committees, by way of a series of questionnaires. The
results are collated and discussed at a Board meeting and
any action plans are documented together with specific
performance goals which are agreed for the coming year.
The Chairman undertakes an annual assessment of the
performance of individual directors and meets privately
with each director to discuss this assessment. A director
is nominated to review the individual performance of the
Chairman and meets privately with him to discuss this
assessment. The 2013 Board review was undertaken
in November and December 2013, in accordance with
the process set out above, and a further review will be
undertaken in October 2014.
Access to information
Directors may access all relevant information required to
discharge their duties in addition to information provided
in Board papers and regular presentations delivered by
executive management on business performance and
issues. With the approval of the Chairman, Directors may
seek independent professional advice, as required, at the
Company’s expense.
A Standards of Conduct Policy is in place to promote
ethical and responsible practices and standards for
directors, employees and consultants of the Company
to discharge their responsibilities. This Policy reflects
the directors’ and key officers’ intention to ensure that
their duties and responsibilities to the Company are
performed with the utmost integrity. A copy of this
Standards of Conduct Policy is available to all employees
and is also available in the Corporate Governance section
of the Company’s website. The terms of the Standards of
Conduct Policy are consistent with ASX CGP3.
Diversity
The Board has established a diversity policy which
supports the commitment of the Company to an inclusive
workplace that embraces and promotes diversity and
provides a framework for new and existing diversity-
related initiatives, strategies and programs within the
business. A copy of the policy is available in the Corporate
Governance section of the Company’s website and the
terms are consistent with ASX CGP3.
In accordance with this policy and ASX Corporate
Governance Principles the Board has established the
following measurable objectives in relation to gender
diversity:
• The Board will actively seek suitable female applicants
for Board vacancies;
• The proportion of females on the Board should not fall
below current levels unless a transparent process fails
to succeed in attracting a suitable female candidate;
• The proportion of females reporting to the CEO should
not fall below the current levels unless a transparent
process fails to succeed in attracting suitable female
candidates; and
• HLO has developed and implemented a ‘keep in touch’
program for employees on maternity leave including a
support program for transition back into the workplace.
This entails a formal program of the relevant staff
members meeting with their supervisor every 3 months,
invitations to staff functions, morning teas to keep in
touch and refresher courses offered where required.
helloworldlimited.com.au At 30 June 2014 the following was recorded:
4
Integrity of financial reporting
Number of females on the Board
Proportion of females reporting to the CEO
Number
1
7
%
14.3
47
The proportion of females on the Board and reporting to
the CEO did not fall below the level as at 30 June 2013.
Proportion of women in the organisation
There are 651 female employees (representing 69%) in
the Group and 33 female employees (representing 47%)
who report to the CEO’s direct reports.
Share trading
A Share Trading Policy is in place for directors, senior
executives and employees. The objective of the policy
is to minimise the risk of directors and employees who
may hold material non-public information contravening
the laws against insider trading, ensure the Company
is able to meet its reporting obligations under the ASX
Listing Rules and increase transparency with respect to
trading in securities of the Company. A copy of the policy
is available in the Corporate Governance section of the
Company’s website and the terms are consistent with
ASX CGP3.
Protected disclosures
The Group’s Whistleblower Policy encourages employees
to report concerns in relation to illegal, unethical or
improper conduct in circumstances where they may be
apprehensive about raising their concern because of fear
of possible adverse repercussions. The Whistleblower
Policy is available to all HLO employees and is also
available in the Corporate Governance section of the
Company’s website.
The Board has an Audit Committee to assist the Board
in the discharge of its responsibilities.
The Audit Committee consists of the following Non-
Executive Directors:
• J M Millar (Chairman) (Independent)
• A John
• B Johnson
• T Dery (Independent)
The Audit Committee charter is available in the Corporate
Governance section of the Company’s website and the
composition, operations and responsibilities of the
Committee are consistent with ASX CGP 4, except that,
due to the small number of Independent Directors,
the Audit Committee does not have a majority of
Independent Directors and as such is inconsistent with
ASX CGP 4.2. The members are however considered to be
the best qualified to serve on the Committee given their
background and experience. The Committee is chaired by
an independent director who is not the Chairman of HLO,
Mr James M Millar.
Details of these Directors’ qualifications and attendance
at Audit Committee meetings are set out in the Directors’
Report on pages 10 to 15.
The Board and Audit Committee closely monitor the
independence of the external and internal auditors.
Regular reviews of the independence safeguards put in
place by the internal and external auditors are undertaken
including the rotation of the external audit engagement
partner every five years.
The lead audit partner responsible for the Group’s
external audit is required to attend each Annual General
Meeting and to be available to answer shareholder
questions about the conduct of the audit and the
preparation and content of the auditor’s report.
For the year ended 30 June 2014 there were no formal
internal audit procedures performed. However, HLO
Management has confirmed that appropriate control
and reconciliation procedures were in place throughout
the year. The Directors recognise that an Internal Audit
function is a fundamental contributor to good governance
and the Audit Committee are currently finalising the
nature and scope of the internal audit function within the
Group for the financial year ending 30 June 2015.
49
5 Timely and balanced disclosure
The Company has a written policy on information
disclosure that focuses on continuous disclosure of any
information concerning the Group that a reasonable
person would expect to have a material effect on the
price of the Company’s securities.
A copy of the Continuous Disclosure Policy is located
in the Corporate Governance section of the Company’s
website and the terms are consistent with ASX CGP 5.
6 Rights of shareholders
The HLO Shareholder Communications Policy
promotes effective communication with the Company’s
shareholders and encourages shareholder participation
at Annual General Meetings. A copy of this Policy, which
deals with communication through the ASX, the Share
Registry, shareholder meetings and the Annual Report,
may be found in the Corporate Governance section of the
Company’s website. All of the Company’s announcements
to the market may also be accessed through the
Company’s website. The HLO Annual Reports since 2007
are posted on the Company’s website.
Shareholders are provided with the opportunity to
question the Board concerning the operations of the
Company at the Annual General Meeting. They are also
afforded the opportunity to question the Company’s
auditors at that meeting concerning matters related to
the audit of the Company’s financial statements.
7 Recognising and managing risk
The Company has a written policy in place for the
oversight and management of its material business
risks. The Group takes a proactive approach to risk
management. The Board is responsible for ensuring that
risks, as well as opportunities, are identified on a timely
basis and receive an appropriate and measured response.
A copy of the Risk Management Policy is located in the
Corporate Governance section of the Company’s website.
HLO has an Executive Committee (Exco) with the
responsibility to, amongst other things, identify,
assess, monitor and manage risks. The risk
management performance of the Exco is monitored
by the Audit Committee. Strategic, operational,
financial and compliance related risks in each
Business Unit have been identified and risk matrices
prepared. Each risk matrix provides an overview of
the key risks and a residual risk rating which includes
assessment of the effectiveness of the risks that
are being managed across the Group. The risk
assessment is reviewed on an ongoing basis and is
updated as and when required.
The Exco appointed an external specialist in business
continuity planning who has assisted in establishing a
robust and comprehensive set of plans that will ensure
continuation of the Group’s services to customers
and stakeholders following disruption.
The Board has received a report from the Exco/
management as to the effectiveness of the Company’s
management of its material business risks.
The Board has also received assurance from the CEO
that the declaration provided in accordance with section
295A of the Corporations Act is founded on a sound
system of risk management and internal control and
that the system is operating effectively in all material
respects in relation to financial reporting risks.
Internal Audit
For the year ended 30 June 2014 there were no formal
internal audit procedures performed. However, HLO
Management has confirmed that appropriate control
and reconciliation procedures were in place throughout
the year. The Directors recognise that an Internal
Audit function is a fundamental contributor to good
governance and the Audit Committee are currently
finalising the nature and scope of the internal audit
function within the Group for the financial year ending
30 June 2015.
helloworldlimited.com.au 8 Remunerating fairly and responsibly
Executive management
Remuneration packages for executive management
are generally set to be competitive so as to both retain
executives and attract experienced executives to the
Company. Packages comprise a fixed (cash) element and
variable incentive components. Payment of the variable
components will depend on the Company’s financial
performance and the executive’s personal performance.
An equity based remuneration scheme was approved
by shareholders at the 2011 AGM and implemented for
executive management during the year ended 30 June
2011. Executive Directors participate in this scheme
subject to shareholder approval.
The HLO remuneration philosophy, objectives and
arrangements are detailed in the Remuneration Report
which forms part of the Directors’ Report.
Directors
The annual total of fees paid to Non-Executive Directors
is set by the Company’s shareholders and allocated
as Directors’ Fees and Committee Fees by the Board
on the basis of the roles undertaken by the Directors.
Full details of Directors’ remuneration appear in the
Remuneration Report. These fees are inclusive of
statutory superannuation contributions. No retirement
benefits are paid to Non-Executive Directors and no
equity-based remuneration scheme exists for them.
Remuneration
The Board has established a Remuneration &
Nominations Committee to assist the Board in the
discharge of its duties. The Remuneration & Nominations
Committee consists of the following Non-Executive
Directors:
• S Bennett
• A Cummins (Chairman)
• T Dery
• B Johnson
The Remuneration & Nominations Committee charter
is available in the Corporate Governance section of
the Company’s website. The composition, operations
and responsibilities of the Committee is a departure
from ASX CGP 8.2 for the reason explained above and,
as a consequence, the Remuneration & Nominations
Committee does not have a majority of independent
directors and the Chairman is not an independent
director. The Chairman and members of the Committee
are however, considered to be the best qualified to serve
their respective roles on the Committee given their
background and experience.
Details of the Directors’ qualifications and attendance at
the Remuneration & Nominations Committee meetings
are set out in the Directors’ Report on pages 10 to 15.
51
CONSOLIDATED
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2014
REVENUE
Employee benefits expenses
Advertising, selling and marketing expenses
Communication and technology expenses
Occupancy and rental expenses
Operating expenses
Depreciation and amortisation
Fair value loss on Investment Property
Impairment of goodwill
Loss on disposal of investments
Share of net profits of associates accounted for using the equity method
OPERATING (LOSS)/PROFIT
Finance expense
(LOSS)/PROFIT BEFORE INCOME TAX EXPENSE
Income tax expense
(LOSS)/PROFIT AFTER INCOME TAX EXPENSE
LESS PROFIT ATTRIBUTABLE TO NON-CONTROLLING INTERESTS
(LOSS)/PROFIT ATTRIBUTABLE TO OWNERS OF HELLOWORLD LIMITED
(Loss)/earnings per share (EPS) attributable to owners of Helloworld Limited
Note
CONSOLIDATED
2014
$’000
2013
$’000
(restated)1
4
4
291,671
332,763
(132,527)
(152,152)
(66,578)
(18,160)
(13,908)
(39,470)
(14,032)
–
(59,500)
(5,473)
165
(57,812)
(3,354)
(61,166)
(2,077)
(63,243)
(104)
(63,347)
(66,863)
(20,031)
(15,224)
(37,323)
(10,805)
(246)
–
–
136
30,255
(3,601)
26,654
(10,294)
16,360
(180)
16,180
4
4
31
12
5
7
Basic (loss)/earnings per share (cents)
Diluted (loss)/earnings per share (cents)
9
9
(14.38)
(14.38)
3.68
3.63
1
Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies.
The Consolidated Income Statement should be read in conjunction with the accompanying notes set out on pages 57 to 125.
helloworldlimited.com.au CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2014
(LOSS)/PROFIT AFTER INCOME TAX
OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be reclassified to profit or loss
Change in fair value of cash flow hedges
Income tax on cash flow hedges
Exchange differences on translation of foreign operations
Exchange differences on entities disposed of taken to profit
Items that will not be reclassified to profit or loss
Defined benefit plan actuarial gain
Deferred tax expense on defined benefit plan
OTHER COMPREHENSIVE INCOME FOR THE PERIOD, NET OF INCOME TAX
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD, NET OF INCOME TAX
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD IS ATTRIBUTABLE TO:
Owners of Helloworld Limited
Non-controlling interests
1
Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies.
Note
22(d)
7(c)
22(d)
22(d)
18
7(c)
CONSOLIDATED
2014
$’000
2013
$’000
(restated)1
(63,243)
16,360
(2,457)
873
1,283
725
2,080
(494)
2,010
(61,233)
(61,337)
104
(61,233)
1,994
(679)
1,884
–
4,079
(1,150)
6,128
22,488
22,308
180
22,488
The Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes set out on pages 57 to 125.
53
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 30 JUNE 2014
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Investments accounted for using the equity method
Property, plant and equipment
Investment properties
Intangible assets
Deferred tax asset
Defined benefit asset
Other non-current assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Borrowings
Provisions
Deferred revenue
Derivative financial instruments
Income tax payable
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Provisions
Other non-current liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Other reserves
(Accumulated losses)/retained earnings
Capital and reserves attributable to equity holders of Helloworld Limited
Non-controlling interests
TOTAL EQUITY
Note
CONSOLIDATED
2014
$’000
2013
$’000
(restated)1
10
11
12
13
14
15
18
16
17
19
20
17
19
22
22
22
184,320
105,470
109
–
234,934
112,501
214
3,321
289,899
350,970
463
942
20,506
175
547
821
24,234
175
360,481
419,871
7,205
2,910
658
393,340
683,239
7,063
1,260
198
454,169
805,139
197,382
236,951
892
12,752
66,019
2,710
19
1,991
15,086
75,992
321
6,895
279,774
337,236
23,345
1,370
1,762
26,477
306,251
376,988
278,822
160,164
(62,070)
376,916
376,916
72
376,988
23,025
1,793
1,202
26,020
363,256
441,883
278,822
159,899
1,894
440,615
440,615
1,268
441,883
1 Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies and Note 14 for details regarding the restatement as a
result of an error.
The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes set out on pages 57 to 125.
helloworldlimited.com.au CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2014
CONSOLIDATED
$’000
Contributed
Equity
(Accumulated
Losses)/
Retained
Earnings
Other
Reserves
Non-
controlling
Interests
Total
Balance at 1 July 2012 (restated1)
278,822
156,166
(12,815)
422,173
Profit after income tax
Other comprehensive income
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Transactions with owners in their capacity as
owners net of tax:
Dividends paid2
Long term incentive plan
Shares purchased on market
Expensed during the year
Transactions with non-controlling interests:
Acquisitions
–
–
–
–
–
–
–
Balance at 1 July 2013
(Loss)/profit after income tax
Other comprehensive income
TOTAL COMPREHENSIVE
INCOME/(LOSS) FOR THE PERIOD
Transactions with owners in their capacity as
owners net of tax:
Dividends paid2
Long term incentive plan
Shares purchased on the market
Expensed during the year
Transactions with non-controlling interests:
Acquisitions
Dividends paid
Disposals
–
–
–
–
–
–
–
–
–
–
3,199
3,199
16,180
2,929
19,109
16,180
6,128
22,308
–
(4,400)
(4,400)
(35)
569
–
–
–
–
(35)
569
–
67
1,021
180
–
180
–
–
–
Total
Equity
423,194
16,360
6,128
22,488
(4,400)
(35)
569
67
278,822
159,899
1,894
(63,347)
1,586
440,615
(63,347)
2,010
1,268
104
–
441,883
(63,243)
2,010
–
424
424
(61,761)
(61,337)
104
(61,233)
–
(2,203)
(2,203)
(246)
87
–
–
–
–
–
–
–
–
(246)
87
–
–
–
–
–
–
8
(324)
(984)
(2,203)
(246)
87
8
(324)
(984)
BALANCE AT 30 JUNE 2013 (RESTATED1)
278,822
159,899
1,894
440,615
1,268
441,883
BALANCE AT 30 JUNE 2014
278,822
160,164
(62,070)
376,916
72
376,988
1 Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies.
2 Dividends were paid from the retained earnings of the parent company, Helloworld Limited.
The Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes set out on pages 57 to 125.
55
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2014
CONSOLIDATED
2014
$’000
2013
$’000
Note
2,731,200
2,823,629
(2,757,048)
(2,783,430)
5,073
(2,350)
(7,720)
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from course of operations (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest paid
Income taxes paid
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
23
(30,845)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
Payments for intangibles
Payments for investments in controlled entities
Proceeds from disposal of investments, net of client cash disposed
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of intangibles
Dividends paid to minority shareholder
Contributions from minority shareholder
Dividends received from associates
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayment of borrowings
Purchase of shares on market
Dividends paid to company shareholders
Borrowing costs paid and capitalised
NET CASH OUTFLOW FROM FINANCING ACTIVITIES
Net (decrease)/increase in cash and cash equivalents held
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
Non-cash financing and investing activities
(3,696)
(9,331)
(1,786)
(3,016)
200
84
(324)
8
48
(17,813)
3,675
(4,963)
(246)
(2,203)
(1,143)
(4,880)
(53,538)
234,934
2,924
184,320
31
31
12
22
8
10
6,085
(3,601)
(7,226)
35,457
(2,889)
(7,023)
–
–
501
–
–
–
185
(9,226)
6,323
(11,801)
(35)
(4,400)
–
(9,913)
16,318
216,495
2,121
234,934
For information on the Group’s non cash financing and investing activities refer to note 23 in the financial statements.
The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes set out on pages 57 to 125.
helloworldlimited.com.au NOTES TO THE
FINANCIAL STATEMENTS
1. Reporting entity
Helloworld Limited (“HLO” or the Company) is a
company limited by shares incorporated and domiciled
in Australia whose shares are publicly traded on the
ASX. The consolidated financial statements for the year
ended 30 June 2014 comprises Stella Travel Services
Holdings Pty Limited (STSH), as the accounting parent,
and its subsidiaries (together referred to as “HLO”, the
“Group” or the “Consolidated Entity”).
Helloworld Limited changed its name from Jetset
Travelworld Limited on 2 December 2013, and the
Company’s ASX code changed from JET to HLO.
The financial statements of the Group for the year ended
30 June 2014 were authorised for issue in accordance
with a resolution of the directors on 27 August 2014.
The directors have the power to amend and reissue the
financial statements.
The nature of the operations and principal activities
of the Group are described in the Directors’ Report.
HLO is a for-profit entity.
2. Basis of preparation
(a) Statement of compliance
These general purpose financial statements have been
prepared in accordance with Australian Accounting
Standards (AASBs) (including Australian Accounting
Interpretations) adopted by the Australian Accounting
Standards Board (AASB) and the Corporations Act 2001.
The consolidated financial statements of the Group
comply with International Financial Reporting Standards
(IFRS) and interpretations adopted by the International
Accounting Standards Board (IASB).
(b) Historical cost convention
These financial statements have been prepared on a
historical cost basis, except for the following:
• available for sale financial assets, financial assets
and liabilities (including derivative instruments),
certain classes of property, plant and equipment and
investment property measured at fair value;
• assets held for sale- measured at fair value less cost
of disposal; and
• retirement benefit obligations – plan assets measured
at fair value.
(c) Functional and presentation currency
Items included in the financial statements of each of
the Group’s entities are measured using the currency of
the primary economic environment in which the entity
operates (“the functional currency”).
(d) Rounding of amounts
The company is of a kind referred to in Australian
Securities & Investments Commission Class Order (CO)
98/100 and in accordance with the CO, amounts in the
financial statements and Directors’ Report have been
rounded to the nearest thousand dollars, or in certain
cases the nearest dollar.
(e) Comparative periods
Where necessary, comparative figures have been
adjusted to conform with changes in presentation in the
current period.
(f) Use of critical accounting estimates
and judgements
The preparation of financial statements requires
management to make estimates, judgments and
assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from
these estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the
estimate is revised and in any future periods affected.
Significant accounting estimates and
assumptions
(i) Impairment of goodwill and intangibles with
indefinite useful lives
The Group determines whether goodwill and intangibles
with indefinite useful lives are impaired at least on
an annual basis. This requires an estimation of the
recoverable amount of the cash-generating units (CGUs)
57
to which the goodwill and intangibles with indefinite
useful lives are allocated.
The key assumptions used in this estimation of
recoverable amount of goodwill and intangibles with
indefinite useful lives are outlined in note 14.
(ii) Commission revenue
The Group estimates override commission revenue
generated by airlines and leisure partners. The
commission revenue accrual process is inherently
judgemental and is impacted significantly by factors
which are not completely under the control of HLO.
These factors include:
• a significant portion of commission contract periods
do not correspond to the Group’s financial year end.
Judgements and estimation techniques are required to
determine anticipated future flown revenues over the
remaining contract year and the associated commission
rates applicable to these forecast levels;
• the differing commencement dates of the commission
contracts mean that commissions may have to be
estimated for contracts for which the applicable
commission rates have not been finalised and agreed
between the parties; and
• periodic renegotiation of terms and contractual
arrangements with the suppliers of travel products
may result in additional volume/incentives, rebates
or other bonuses being received which relate to
past performance and are not specified in existing
contracts.
The accounting policy for commission revenue, incentives
and rebates is set out in note 3(e).
(iii) Defined Pension benefits
The present value of pension obligations depends
on a number of factors that are determined on an
actuarial basis using a number of assumptions. The
assumptions used in determining the net cost (income)
for pensions include the discount rate. Any changes in
these assumptions will impact the carrying amount of
the pension obligations.
The Group determines the discount rate at the end of
each year. This is the interest rate that should be used
to determine the present value of the estimated future
cash outflows expected to be required to settle the
pension obligations. In determining the appropriate
discount rate the group considers the interest rates of
Australian Dollar treasury bonds, and that have terms
to maturity approximating the terms of the related
pension liability.
Other key assumptions for pension obligations are
based in part on current market conditions. Additional
information is disclosed in Note 18.
(iv) Accounting for the GST legal case
The Group is currently involved in a legal case with the
Australian Taxation Office in relation to a GST matter.
Additional information in relation to the matter is
disclosed in note 7(g).
3. Significant accounting policies
The principle accounting policies adopted in the
preparation of these consolidated financial statements
are set out below. These policies have been consistently
applied to all the years presented, unless otherwise
stated. The financial statements are for the consolidated
entity consisting of Helloworld Limited and its
controlled entities.
(a) Principles of consolidation
(i) Reverse Acquisition Accounting
On 30 September 2010, HLO (at the time JTL) completed
a Merger with Stella Travel Services Holdings Pty Limited
(STSH). In accordance with accounting standards, this
merger has been accounted for as a reverse acquisition
business combination. This reverse acquisition business
combination supersedes the reverse acquisition business
combination that arose from the Merger of Helloworld
Limited (at the time Jetset Travelworld Limited), Qantas
Holidays Limited and QBT Pty Limited in July 2008.
In applying the requirements of AASB 3 Business
Combinations to the Group:
(i)
Helloworld Limited is the legal parent entity to the
Group; and
(ii)
STSH, which is neither the legal parent nor legal
acquirer, is deemed to be the accounting acquirer.
The consolidated financial information incorporated the
assets and liabilities of all entities deemed to be acquired
by STSH including Helloworld Limited and its controlled
entities and the results of these entities for the period
from which those entities are accounted for as being
acquired by STSH. The assets and liabilities of Helloworld
Limited and its controlled entities acquired by STSH were
recorded at fair value whilst the assets and liabilities
of STSH and its controlled entities were maintained at
their book value. The impact of all transactions between
entities in the Group were eliminated in full.
helloworldlimited.com.au AASB 3 Business Combinations requires that
consolidated financial statements prepared following
a reverse acquisition shall be issued under the name of
the legal parent (i.e. HLO), but be a continuation of the
financial statements of the legal subsidiary (i.e. STSH,
the acquirer for accounting purposes).
(ii) Subsidiaries included in the
financial report
The consolidated financial statements incorporate the
assets and liabilities of all subsidiaries of Helloworld
Limited as at 30 June 2014 and the results of all
subsidiaries for the year then ended. Helloworld Limited
and its subsidiaries together are referred to in this
financial report as the Group or the consolidated entity.
Subsidiaries are all entities (including structured entities)
over which the Group has control. The Group controls
an entity when the Group is exposed to, or has rights to,
variable returns from its involvement with the entity and
has the ability to affect those returns through its power
to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
The acquisition method of accounting is used to account
for business combinations by the Group (refer to
note 31).
Intercompany transactions, balances and unrealised
gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless
the transaction provides evidence of the impairment of
the asset transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of
subsidiaries are shown separately in the consolidated
income statement, consolidated statement of
comprehensive income, consolidated statement of
changes in equity and the consolidated statement of
financial position respectively.
Investments in subsidiaries are accounted for at cost in
the separate financial statements of Helloworld Limited
and other individual entity financial statements within
the Group.
(iii) Accounting for associates
Associates are all entities over which the Group has
significant influence but not control or joint control,
generally accompanying a shareholding of between 20%
and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting,
after initially being recognised at cost. The Group’s
investment in associates includes goodwill (net of any
accumulated impairment loss) identified on acquisition.
The Group’s share of its associates’ post-acquisition
profits or losses is recognised in profit or loss, and
its share of post-acquisition movements in reserves
is recognised in other comprehensive income. The
cumulative post-acquisition movements are adjusted
against the carrying amount of the investment. Dividends
receivable from associates are adjusted against the
carrying amount of the investment.
When the Group’s share of losses in an associate equals
or exceeds its interest in the associate, including any
other unsecured long-term receivables, the Group does
not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
The Group reviews the carrying value of the investment
in associates for impairment annually. Any identified
impairment is recorded as an impairment charge in the
profit or loss.
Unrealised gains on transactions between the Group
and its associates are eliminated to the extent of the
Group’s interest in the associates. Unrealised losses
are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred.
Accounting policies of associates have been changed
where necessary to ensure consistency with the policies
adopted by the Group.
(iv) Changes in ownership interests
The Group treats transactions with non-controlling
interests that do not result in a loss of control as
transactions with equity owners of the Group. A change
in ownership interest results in an adjustment between
the carrying value of the controlling and non-controlling
interests to reflect their relative interests in a subsidiary.
Any difference between the amount of the adjustment to
non-controlling interests and any consideration paid or
received is recognised in a separate reserve within equity
attributable to owners of Helloworld Limited.
When the Group ceases to have control, joint control or
significant influence, any retained interest in the entity
is remeasured to its fair value with the change in carrying
amount recognised in profit or loss. The fair value is the
initial carrying amount for the purposes of subsequently
accounting for the retained interest as an associate,
joint venture or financial asset. In addition, any amounts
previously recognised in other comprehensive income in
respect of that entity are accounted for as if the group
had directly disposed of the related assets or liabilities.
59
This may mean that amounts previously recognised in
other comprehensive income are reclassified to profit
or loss.
If the ownership interest in a joint arrangement or an
associate is reduced but joint control or significant
influence is retained, only a proportionate share of the
amounts previously recognised in other comprehensive
income are reclassified to profit or loss where
appropriate.
(b) New and amended standards
(i) New and amended standards adopted by
the Group
The Group has applied the following standards and
amendments for the first time for their annual reporting
period commencing 1 July 2013:
• AASB 2012-10 Amendments to Australian Accounting
Standards – Transition Guidance and Other
Amendments which provides an exemption from the
requirement to disclose the impact of the change in
accounting policy on the current period
• AASB 10 Consolidated Financial Statements, AASB 11
Joint Arrangements, AASB 12 Disclosure of Interests
in Other Entities, AASB 128 Investments in Associates
and Joint Ventures, AASB 127 Separate Financial
Statements and AASB 2011-7 Amendments to
Australian Accounting Standards arising from the
Consolidation and Joint Arrangements Standards
• AASB 2011-4 Amendments to Australian Accounting
Standards to Remove Individual Key Management
Personnel Disclosure requirements
• AASB 13 Fair Value Measurement and AASB 2011-8
Amendments to Australian Accounting Standards
arising from AASB 13
• AASB 119 Employee Benefits (September 2011) and
AASB 2011-10 Amendments to Australian Accounting
Standards arising from AASB 119 (September 2011)
• AASB 2012-5 Amendments to Australian Accounting
Standard arising from Annual Improvements 2009-
2011 Cycle, and
• AASB 2012-2 Amendments to Australian Accounting
Standards - Disclosures -Offsetting Financial Assets
and Financial Liabilities.
The adoption of AASB 119 resulted in changes in
accounting policies and adjustments to the amounts
recognised in the financial statements. These are
explained and summarised in note 3(b)(iii) below. The
other standards only affected the disclosures in the
notes to the financial statements.
(ii) New standards and interpretations not
yet adopted
Certain new accounting standards and interpretations
have been published that are not mandatory for the
30 June 2014 reporting period and have not been early
adopted by the Group. The Group’s assessment of the
impact of these new standards and interpretations is
set out below.
AASB 9 Financial Instruments
AASB 9 Financial Instruments addresses the
classification, measurement and de-recognition of
financial assets and financial liabilities, partially
replacing AASB 139 Financial instruments: Recognition
and measurement. This standard is available for early
adoption however will not become mandatory for the
Group’s financial statements until 1 January 2017. The
Group has not yet decided when to adopt AASB 9 and has
not yet determined the potential effect of the standard.
There are no other standards that are not yet effective
and that are expected to have a material impact on the
entity in the current or future reporting periods and on
foreseeable future transactions.
(iii) Changes in accounting policies
As explained above, the Group has adopted a number
of new or revised accounting standards this year that
have resulted in changes in accounting policies and
adjustments to the amounts recognised in the financial
statements.
Employee benefits
The adoption of the revised AASB 119 Employee
Benefits resulted in a change to the entity’s accounting
policy which affected items recognised in the financial
statements.
• All past service costs are now recognised immediately
in profit or loss. The Group had no unrecognised
past service cost as at 1 July 2013 and therefore no
adjustments were required.
• The amount of net defined benefit expense that is
recognised in profit or loss under the revised standard
is higher than the amount that would have been
recognised under the previous standard.
The revised standard does not mandate where to
present remeasurements in equity. Helloworld Limited
has chosen to retain its previous policy of recognising
remeasurements directly in retained earnings.
As the revised standard must be adopted retrospectively,
adjustments to the defined benefit obligations have
been recognised at the beginning of the earliest period
helloworldlimited.com.au presented (1 July 2012) and the income statement and
statement of comprehensive income were restated for
the comparative period.
The revised standard has also changed the accounting
for the Group’s annual leave obligations. The entity must
now identify the portion of annual leave which is not
expected to be taken within 12 months, and measure
this on a discounted basis, with the total discounted
amount classified as a short term obligation. The Group
has assessed the impact of these requirements and
determined that the impact of the change is not material.
The impact of the change in accounting policy for
the year ended 30 June 2013 and 30 June 2014 was
immaterial to the income statement. The impact of
adopting the standard on the Consolidated Statement
of Financial Position for 30 June 2012 and 30 June
2013 and the Consolidated Income Statement and the
Consolidated Statement of Comprehensive Income for
the year 30 June 2013 is shown below:
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION(EXTRACTS)
1 July 2013
(Previously
stated)
$’000
Impact of
AASB 119
$’000
1 July 2013
(Restated)
$’000
1 July 2012
(Previously
stated)
$’000
Impact of
AASB 119
$’000
1 July 2012
(Restated)
$’000
216
6,171
1,044
(313)
1,260
5,858
–
7,835
–
441,152
–
731
731
731
–
441,883
(3,281)
422,400
1,894
441,883
(13,609)
422,400
–
(341)
1,135
794
794
794
–
7,494
(2,146)
423,194
(12,815)
423,194
Non-current assets
Defined benefit asset
Deferred tax asset
Non-current liabilities
Defined benefit liability
Net assets
Equity
Retained earnings/(accumulated losses)
1,163
Total equity
441,152
INCOME STATEMENT (EXTRACTS)
Employee benefits expenses
Operating result
Profit before income tax
Income tax expense
Profit after income tax
Less profit attributable to non-controlling interests
Profit attributable to owners of Helloworld Limited
Basic earnings per share (cents)
Diluted earnings per share (cents)
STATEMENT OF OTHER COMPREHENSIVE INCOME (EXTRACTS)
Defined benefit plan actuarial gain
Deferred tax on actuarial gain
Other comprehensive income for the period, net of income tax
Total comprehensive income for the period, net of income tax
Total comprehensive income for the period is attributable to:
Owners of Helloworld Limited
Non-controlling interests
30 June 2013
(Previously
stated)
$’000
Impact of
AASB 119
$’000
30 June 2013
(Restated)
$’000
(151,673)
30,734
27,133
(10,438)
16,695
(180)
16,515
3.76
3.71
3,691
(1,034)
5,856
22,551
22,371
180
22,551
(479)
(479)
(479)
144
(335)
–
(335)
(0.08)
(0.08)
388
(116)
272
(63)
(63)
-
(63)
(152,152)
30,255
26,654
(10,294)
16,360
(180)
16,180
3.68
3.63
4,079
(1,150)
6,128
22,488
22,308
180
22,488
61
Key Management Personnel Disclosure requirements
The adoption of AASB 2011-4 Amendments to
Australian Accounting Standards to Remove Individual
Key Management Personnel Disclosure requirements
has removed the individual key management personnel
(KMP) disclosure requirements from AASB 124 Related
Party Disclosures. This was done in order to achieve
consistency with the international equivalent standard
and remove a duplication of the requirements with the
Corporations Act 2001. This has reduced the disclosures
that are currently required in the notes to the financial
statements, and has not affected any of the amounts
recognised in the financial statements.
(c) Segment reporting
The Group determines and presents Operating Segments
based on the information that is internally provided to
the Board, who are the Group’s chief operating decision
makers.
An Operating Segment is a component of the Group
that engages in business activities from which it may
earn revenues and incur expenses, including revenues
and expenses that relate to transactions with any of the
Group’s other components. The operating results of each
segment are regularly reviewed by Helloworld Limited’s
Board to make decisions about resources to be allocated
to the segment and assess its performance, and for
which discrete financial information is available.
Corporate charges are only allocated to Operating
Segments to the extent that they are considered part of
the core operations of any segments.
(d) Foreign currency translation
(i) Transactions and balances
Foreign currency transactions are translated to the
functional currency at the rates of exchange prevailing
at the date of each transaction. At balance date,
amounts receivable and payable in foreign currencies
are translated at the rates of exchange prevailing at
that date. Exchange rate differences resulting from the
settlement of such transactions and from translation
of monetary assets and liabilities are brought to
account as exchange gains or losses in the income
statement in the year in which the exchange rates
change, except where they are deferred in equity if they
relate to qualifying cashflow hedges and qualifying net
investment hedges or are attributable to part of the
net investment in a foreign operation. Foreign exchange
gains and losses that relate to borrowings are presented
in the income statement within finance costs. All other
foreign exchange gains or losses are presented in the
income statement on a net basis within other income or
expense. Translation differences on assets and liabilities
carried at fair value are reported as part of the fair value
gain or loss. Non-monetary assets and liabilities that are
measured in terms of historical cost in a foreign currency
are translated using the exchange rate at the date of
the transaction. Non-monetary assets and liabilities
denominated in foreign currencies that are stated at
fair value are translated to Australian dollars at foreign
exchange rates prevailing at the dates the fair value
was determined. All foreign exchange gains/losses are
presented in the income statement within revenue or
other expenses. Translation differences on assets and
liabilities carried at fair value are reported as part of
the fair value gain or loss.
(ii) Investments in foreign operations
The results and financial position of foreign operations
(none of which has the currency of a hyperinflationary
economy) that have a functional currency different
from the presentation currency are translated into the
presentation currency as follows:
• assets and liabilities for each consolidated statement
of financial position presented are translated at the
closing exchange rate at the date of that consolidated
statement of financial position;
• income and expenses for each consolidated
income statement and consolidated statement of
comprehensive income are translated at average
exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case
income and expenses are translated at the dates of
the transactions); and
• all resulting exchange differences are recognised in
other comprehensive income.
On consolidation, exchange differences arising from the
translation of any net investment in foreign entities, and
of borrowings and other financial instruments designated
as hedges of such investments, are recognised in other
comprehensive income. When a foreign operation is sold
or any borrowings forming part of the net investment
are repaid, the associated exchange differences are
reclassified to profit or loss, as part of the gain or loss on
sale. Goodwill and fair value adjustments arising on the
acquisition of a foreign operation are treated as assets
and liabilities of the foreign operation and translated at
the closing rate.
helloworldlimited.com.au (e) Revenue recognition
The principal activities of the Group are those of acting as
an agent for tour, travel and accommodation providers for
which the Group earns service revenue predominantly in
the form of commissions, incentives and rebates.
Revenue is recognised and measured at the fair value
of the consideration received or receivable. Amounts
disclosed as revenue are net of returns, trade allowances,
rebates and amounts collected on behalf of third parties.
The Group recognises revenue when the amount of
revenue can be reliably measured, it is probable that
future economic benefits will flow to the entity and
specific criteria have been met for each of the Group’s
activities as described below:
(i) Rendering of services
Commission from the arrangement of tours, travel
and travel-related products
Commissions from the arrangement of tours and
travel are recognised when tickets, itineraries or travel
documents are issued, consistent with an agency
relationship. Revenue is recognised as the net amount
of commission received or receivable by the Group.
Commissions from the arrangement of airline tickets
are recognised when the tickets are issued. Revenue is
disclosed as the net amount of commission received or
receivable by the Group.
Commissions from travel-related products (e.g. insurance
and foreign currency purchasing services) and incentives
from suppliers are recognised as revenue when they are
earned and the amount can be reliably measured. Revenue
is disclosed as the gross amount of income received or
receivable by the Group.
Override Commission Revenue
The general principles of override commission revenue
recognition are summarised below.
The Group recognises override commission revenue
once it is contractually entitled to receive this. Generally,
override commission revenue is recognised once the
passenger has flown/departed (for air and cruise) or the
passenger has commenced their hotel stay.
There are separate contractual agreements with each
supplier and the contractual periods of these agreements
vary depending on the supplier. For example, some
suppliers operate on a January to December contract
period whilst others may be April to March or July to June.
Override commission revenue is calculated for the
contract period, based on value of “Eligible Travel” during
the period and the “Override Rates” in the each of the
supplier contracts.
• The definition of Eligible Travel varies by supplier and is
defined in each supplier contract. Eligible Travel for the
financial year is calculated by the Group based on the
detailed booking information and is reviewed in light of
currently booking trends and historical information.
• The Override Rates applied to calculate the override
commission revenue are specified in each supplier
contract and often there are tiered override earning
rates based on differing levels of Eligible Travel
sales being achieved for the contractual period
(i.e. performance tiers). In order to estimate the
appropriate Override Rate, the expected Eligible
Travel sales for the contract period are estimated and
compared to the performance tiers. These forecasts
are based on actual sales, forecast bookings and
historical trends. In some instances judgement may
be required if a performance tier is close to being
achieved or missed. This is reviewed in light of current
sales trends and forecast sales and the rates are
adjusted as required.
Override commission revenue is disclosed as the gross
amount of override commissions received or receivable
by the Group.
Other revenue
Franchise, agency and license fees are recognised on
a straight-line basis over the term of the agreement.
Revenue is disclosed as the gross amount of fees
received by the Group.
In relation to marketing activities and conferences
where a principal rather than agency relationship exists,
amounts charged to third parties for advertising and
marketing contributions are recognised as revenue while
associated operating expenses are recorded within
advertising, marketing and selling expenses.
(ii) Dividends
Dividend revenue is recognised when the Group’s right
to receive the payment is established. This applies even
if the dividend is paid out of pre-acquisition profits.
However, the investment may need to be tested for
impairment as a consequence.
(iii) Finance income
Finance income comprises interest income on funds
invested (including available-for-sale financial assets).
Interest income is recognised as it accrues in revenue,
using the effective interest method.
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(f) Cash and cash equivalents
Cash and cash equivalents in the statement of financial
position comprise cash at bank and in hand and short-
term deposits that are readily convertible to known
amounts of cash and which are subject to an insignificant
risk of changes in value.
For the purposes of the statement of cash flows, cash and
cash equivalents consist of cash and cash equivalents as
defined above.
Client cash includes all monies entrusted to the Group
by intending travellers or customers prior to travelling.
A corresponding liability is recorded on the consolidated
statement of financial position while the cash is held
on the clients’ behalf prior to being paid to principals. In
Australia, client cash is deposited into an account held
exclusively for client funds, separate to the general funds
of the entity.
(g) Trade and other receivables
Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
Trade receivables are generally collected within 30 days.
They are presented as current assets unless collection is
not expected within 12 months from the reporting date.
Cash flows relating to short-term receivables are not
discounted if the effect of discounting is immaterial. Bad
debts are written off as incurred. Non-current receivables
are carried at the present value of future net cash inflows
expected to be received.
Collectability of trade receivables is reviewed on an
ongoing basis at an operating unit level. Individual debts
that are known to be uncollectable are written off when
identified. An impairment provision is recognised when
there is objective evidence that the Group will not be able
to collect the receivable. The amount of the impairment
loss is the receivable carrying amount compared to
the present value of the estimated future cash flows,
discounted at the original effective interest rate. The
amount of the impairment loss is recognised in profit or
loss within other expenses. Subsequent recoveries of
amounts previously written off are credited against other
expenses in profit or loss.
(h) Property, plant and equipment
Property, plant and equipment is stated at historical
cost less accumulated depreciation and any accumulated
impairment losses. Subsequent costs are included in
the assets carrying amount or recognised as separate
asset as appropriate, only when it is probable that
future economic benefits associated with the item
will flow to the group and the cost of the item can be
measured reliably. The carrying amount of any component
accounted for as a separate asset is derecognised
when replaced. All other repairs and maintenance are
recognised in profit or loss as incurred.
Depreciation is calculated on a straight-line basis over
the estimated useful life of the specific asset as follows:
• Freehold buildings – 40 years
• Office equipment – 2.5 to 10 years
• Leasehold improvements – term of lease
• Leased plant and equipment – term of lease
The assets’ residual values, useful lives and depreciation
methods are reviewed, and adjusted if appropriate,
at each financial year end on a prospective basis. An
asset’s carrying amount is written down immediately if
the asset’s carrying value is greater than its estimated
recoverable amount.
Cost associated with make-good provisions are
capitalised into the cost of leasehold improvements and
amortised over the corresponding term of lease.
De-recognition
An item of property, plant and equipment is de-
recognised upon disposal or when no further future
economic benefits are expected from its use.
Gains and losses on disposals are determined by
comparing proceeds with the asset carrying amount.
These are included in the income statement.
(i) Leases
The determination of whether an arrangement is or
contains a lease is based on the substance of the
arrangement and requires an assessment of whether the
fulfilment of the arrangement is dependent on the use of
a specific asset or assets and the arrangement conveys a
right to use the asset.
Finance leases, which transfer to the Group substantially
all the risks and benefits incidental to ownership of the
leased items, are capitalised at the inception of the lease
at the fair value of the leased property or, if lower, at the
present value of the minimum lease payments. Lease
payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the
liability. Finance charges are recognised as an expense in
profit or loss.
helloworldlimited.com.au Capitalised leased assets are depreciated over the
shorter of the estimated useful life of the asset and the
lease term if there is no reasonable certainty that the
Group will obtain ownership by the end of the lease term.
Leases in which a significant portion of the risks and
rewards of ownership are not transferred to the Group as
lessee are classified as operating leases.
Operating lease payments are recognised as an expense
in the income statement on a straight-line basis over the
lease term. Operating lease incentives are recognised as
a liability when received and subsequently recognised as
a reduction in the rental expense over the lease term.
(j) Business combinations
The acquisition purchase method of accounting is used
to account for all business combinations, regardless of
whether equity instruments or other assets are acquired.
The consideration transferred for the acquisition of
a subsidiary comprises the fair values of the assets
transferred, the liabilities incurred and the equity interest
issued by the Group.
The consideration transferred also includes the fair value
of any contingent consideration arrangement and the fair
value of any pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are,
with limited exceptions, measured initially at their
fair values at the acquisition date. On an acquisition-
by-acquisition basis, the Group recognises any non-
controlling interest in the acquiree, either at fair value
or at the non-controlling interest’s proportionate share
of the acquiree’s net identifiable assets. Where equity
instruments are issued in an acquisition, the instrument’s
fair value is its published market price at the date of
the exchange unless, in rare circumstances, it can be
demonstrated that the published price at the exchange
date is an unreliable indicator of fair value and that other
evidence and valuation methods provide a more reliable
measure of fair value. Transaction costs arising on the
issue of equity instruments are recognised directly
in equity.
The excess of the consideration transferred, the amount
of any non-controlling interest in the acquiree and the
acquisition date fair value of any previous equity interest
in the acquiree over the fair value of the Group’s share
of the net identifiable assets acquired is recorded as
goodwill. If those amounts are less than the fair value
of the net identifiable assets of the subsidiary acquired
and the measurement of all amounts has been reviewed,
the difference is recognised directly in profit or loss as a
bargain purchase.
Where settlement of any part of cash consideration is
deferred, future amounts payable are discounted to their
present value at the date of exchange. The discount rate
used is the entity’s incremental borrowing rate, being the
rate at which a similar borrowing could be obtained from
an independent financier under comparable terms and
conditions.
Contingent consideration is classified either as equity
or a financial liability. Amounts classified as financial
liabilities are subsequently remeasured to fair value, with
changes in fair value recognised in profit or loss.
If the business combination is achieved in stages,
the acquisition date carrying value of the acquirer’s
previously held equity interest in the acquire is
remeasured to fair value on the acquisition date. Any
gains or losses arising from such remeasurement are
recognised in profit or loss.
(k) Non-current assets (or disposal
groups) held for sale and discontinued
operations
Non-current assets (or disposal groups) are classified as
held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through
continuing use and a sale is considered highly probable.
They are measured at the lower of their carrying amount
and fair value less costs to sell, except for assets such
as deferred tax assets, assets arising from employee
benefits, financial assets and investment property that
are carried at fair value and contractual rights under
insurance contracts, which are specifically exempt from
this requirement.
An impairment loss is recognised for any initial or
subsequent write-down of the asset (or disposal group)
to fair value less costs to sell. A gain is recognised for
any subsequent increases in fair value less costs to sell
of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain
or loss not previously recognised by the date of the sale
of the non-current asset (or disposal group) is recognised
at the date of derecognition.
Non-current assets (including those that are part of a
disposal group) are not depreciated or amortised while
they are classified as held for sale. Interest and other
expenses attributable to the liabilities of a disposal group
classified as held for sale continue to be recognised. Non-
current assets classified as held for sale and the assets of
65
a disposal group classified as held for sale are presented
separately from the other assets in the balance sheet.
The liabilities of a disposal group classified as held for
sale are presented separately from other liabilities in the
balance sheet.
A discontinued operation is a component of the entity
that has been disposed of or is classified as held for sale
and that represents a separate major line of business
or geographical area of operations, is part of a single
co-ordinated plan to dispose of such a line of business or
area of operations, or is a subsidiary acquired exclusively
with a view to resale. The results of discontinued
operations are presented separately in the income
statement.
(l) Impairment of assets
The carrying amounts of the Group’s non-financial
assets are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such
indication exists, then the asset’s recoverable amount
is estimated. For goodwill and intangible assets that
have indefinite lives or are not yet available for use, the
recoverable amount is estimated each year at the same
time or more frequently if events or circumstances
indicate that the carrying amount may not be recoverable.
The recoverable amount of an asset, or the cash
generating unit (CGU), is the greater of its value in use
and its fair value less costs of disposal. In assessing value
in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of
money and the risks specific to the asset. For the purpose
of impairment testing, assets are grouped together
into the smallest group of assets that generates cash
inflows from continuing use that are largely independent
of the cash inflows of other assets or groups of assets
(CGUs). The goodwill acquired in a business combination,
for the purpose of impairment testing, is allocated to
CGUs that are expected to benefit from the synergies
of the combination.
An impairment loss is recognised if the carrying amount
of an asset or its CGU exceeds its recoverable amount.
Impairment losses are recognised in the income
statement. Impairment losses recognised in respect of
CGUs are allocated first to reduce the carrying amount
of any goodwill allocated to the units and then to reduce
the carrying amount of the other assets in the unit
(group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, impairment losses recognised
in prior periods are assessed at each reporting date
for any indications that the loss has decreased or no
longer exists. An impairment loss is reversed if there has
been a change in the estimates used to determine the
recoverable amount.
(m) Trade and other payables
Trade and other payables are initially recognised at
their fair value and subsequently measured at their
amortised cost. Due to their short-term nature, they
are not discounted. They represent liabilities for goods
and services provided to the Group prior to the end of
the financial year that are unpaid and arise when the
Group becomes obliged to make future payments in
respect of the purchase of these goods and services.
Trade and other payables are presented as current
liabilities unless payment is not due within 12 months
from the reporting date.
The amounts are unsecured and are usually paid within
30 days of recognition.
The Group has agent incentive programs in place with its
retail travel agents. Participating retail travel agents earn
incentives based on the volume of completed sales made
with designated preferred suppliers of the Group. The
Group recognises a liability for the cost of the incentives
and these incentives are paid to the retail travel agents
when the liability falls due.
(n) Deferred revenue
Revenues received prior to the finalisation of the booking
are recorded on the statement of financial position as
revenue received in advance. The revenues are recognised
in the income statement at the time of document issue
(i.e. ticketing date), net of the cost of sale in accordance
with the accounting policy note outlined in Note 3(e)(i).
(o) Intangible assets
Intangible assets acquired separately or in a business
combination are initially measured at cost. The cost of
an intangible asset acquired in a business combination
is its fair value as at the date of acquisition. Following
initial recognition, intangible assets are carried at cost
less any accumulated amortisation and any accumulated
impairment losses. Internally generated intangible assets,
excluding capitalised software development costs, are
not capitalised and expenditure is charged against profit
in the year in which the expenditure is incurred.
helloworldlimited.com.au The useful lives of intangible assets are assessed to be
either finite or indefinite. Intangible assets with finite
lives are amortised over the useful life and tested for
impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation
period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at
each financial year end. Changes in the expected useful
life or the expected pattern of consumption of future
economic benefits embodied in the asset are accounted
for prospectively by changing the amortisation period or
method, as appropriate, which is a change in accounting
estimate. The amortisation expense on intangible assets
with finite lives is recognised in profit or loss.
Intangible assets with indefinite useful lives are tested
for impairment annually either individually or at the CGU
level consistent with the methodology outlined in note
14 and note 3(l). Such intangibles are not amortised. The
useful life of an intangible asset with an indefinite life
is reviewed each reporting period to determine whether
indefinite life assessment continues to be supportable.
If not, the change in the useful life assessment from
indefinite to finite is accounted for as a change in an
accounting estimate and is thus accounted for on a
prospective basis.
(i) Goodwill
All business combinations are accounted for by applying
the acquisition method which includes the reverse
acquisition accounting method described in note 3 (a)(i).
Goodwill represents the difference between the cost of
the acquisition and the fair value of the net identifiable
assets acquired. Goodwill is measured at cost less
accumulated impairment losses measured as per the
methodology outlined in note 14 and note 3(l). Gains and
losses on the disposal of an entity include the carrying
amount of the goodwill relating to the entity sold.
(ii) Software and website development costs
An intangible asset arising from development
expenditure on an internal project is recognised only
when the Group can demonstrate the technical feasibility
of completing the intangible asset so that it will be
available for use or sale, its intention to complete and its
ability to use or sell the asset, how the asset will generate
future economic benefits, the availability of resources
to complete the development and the ability to measure
reliably the expenditure attributable to the intangible
asset during its development. Costs capitalised include
external direct costs of materials and service, and direct
payroll and payroll related costs of employees’ time spent
on the project.
Following the initial recognition of the development
expenditure, the cost model is applied requiring the asset
to be carried at cost less any accumulated amortisation
and accumulated impairment losses. Any expenditure
so capitalised is amortised over the period of expected
benefits from the related project.
The carrying value of an intangible asset arising from
development expenditure is tested for impairment
annually when the asset is not yet in use, or more
frequently when an indication of impairment arises
during the reporting period.
A summary of the policy applied to capitalised
development costs is as follows:
Useful life
Amortisation
method used
Impairment test
Software and website development
costs (assets in use)
Finite
3 to 10 years on a straight-line
basis
Amortisation method reviewed
at each financial year end; closing
carrying value reviewed annually
for indicators of impairment
Subsequent expenditure on capitalised intangible assets
is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it
relates. All other expenditure is expensed as incurred.
Gains or losses arising from de-recognition of an
intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the
asset and are recognised in profit or loss when the asset
is de-recognised.
(iii) Brand names and trademarks
Brand names and trademarks that have finite lives are
amortised on a straight-line basis over their estimated
useful lives in accordance with the estimated timing of
benefits expected to be received from those assets.
At 30 June 2014, the amortisation period for finite life
trademarks that are being amortised is between 7.3 and
20 years.
(iv) Franchise systems
Franchise systems are the integrated system of
methods, procedures, techniques and other systems
which, together with a network of franchisees, facilitate
the day-to-day running of a franchise business.
Franchise systems include access to products/
inventory, brands, marketing, advertising, promotional
techniques, training and operational manuals of the
network. Due to the inter-relationship between the
component items of a franchise system as detailed
67
above, the Group considers that these complementary
assets are likely to have similar useful lives and are
recorded as a single identifiable asset in accordance
with accounting standards. The Group considers that
franchise systems have an indefinite useful life and
their carrying values are tested for impairment annually
or when indicators of impairment arise.
(p) Provisions
A provision is recognised when there is a present legal
or constructive obligation as a result of a past event, the
amount can be reliably measured and it is probable that
an outflow of economic benefits will be required to settle
the obligation, the timing or amount of which is uncertain.
Provisions are not recognised for future operating losses.
If the effect is material, a provision is determined by
discounting the expected future cash flows required
to settle the obligation at a pre-tax rate that reflects
current market assessments of the time value of money
and the risks specific to the liability. The unwinding of the
discount is treated as a finance charge.
(i) Dividends
Dividends are only recognised in the financial year in
which the dividend is actually paid. In accordance with
section 27.3 of the Company Constitution (in effect
from 30 November 2010), the Company does not incur
a debt merely by fixing the amount or time for payment
of a dividend. A debt arises only when the time fixed for
payment arrives. The decision to pay a dividend may be
revoked by the Board at any time before then.
(ii) Onerous lease contracts
A provision for onerous lease contracts is recognised
when the expected benefits to be derived by the Group
from a contract are lower than the unavoidable cost of
meeting its obligations under the contract. The provision
is measured at the present value of the lower of the
expected cost of terminating the contract and the
expected net cost of continuing with the contract.
(q) Employee leave benefits
(i) Short term benefits
Liabilities for wages and salaries, including non-monetary
benefits, and annual leave due to settle within 12 months
of the reporting date are recognised in respect of
employees’ services up to the reporting date. They are
measured at the amounts expected to be paid when the
liabilities are settled.
Liabilities for non-accumulating sick leave are recognised
when the leave is taken and are measured at the rates
paid or payable.
The liability for annual leave is recognised in the provision
for employee benefits. All other short term employee
benefit obligations are presented as payables.
(ii) Other long term employee benefit
obligations
The liabilities for long service leave and annual leave are
not expected to be settled wholly within 12 months after
the end of the period in which the employees render the
related service. They are therefore recognised in the
provision for employee benefits and measured as the
present value of expected future payments to be made in
respect of services provided by the employees up to the
end of reporting period using the projected unit credit
method. Consideration is given to expected future wage
and salary levels, experience of employee departures and
periods of service.
Expected future payments are discounted using market
yields at the end of the reporting period of government
bonds with terms and currencies that match, as closely
as possible, the estimated future cash outflows.
Remeasurements as a result of experience adjustments
and changes in actuarial assumptions are recognised in
profit or loss.
The obligations are presented as current liabilities in the
balance sheet if the entity does not have an unconditional
right to defer settlement for at least 12 months after the
reporting date, regardless of when the actual settlement
is expected to occur.
(iii) Share-based payments
Share-based compensation benefits are provided
to executives/employees via the Helloworld Limited
Performance Rights Plan. Information relating to these
schemes is set out in note 32.
The fair value of performance rights granted under the
scheme is recognised as an employee benefits expense
with a corresponding increase in equity. The total amount
to be expensed is determined by reference to the fair
value of the Performance Rights granted, which includes
any market performance conditions and the impact of any
non-vesting conditions but excludes the impact of any
service and non-market performance vesting conditions.
Non-market vesting conditions are included in
assumptions about the number of Performance Rights
that are expected to vest. The total expense is recognised
over the vesting period, which is the period over which all
helloworldlimited.com.au the specified vesting conditions are to be satisfied. At the
end of each period, the entity revises its estimates of the
number of Performance Rights that are expected to vest
based on the non-market vesting conditions. It recognises
the impact of the revision to the original estimates, if
any, in profit or loss, with a corresponding adjustment
to equity.
The plan is administered by Helloworld Limited. When
the Performance Rights are exercised, the Company
transfers the appropriate amounts of shares to the
employee. The proceeds received (if any) net of any
directly attributable transactions costs are credited
directly to equity.
Where any group company or trust purchases the
Company’s equity instruments, for example purchases
of shares by Helloworld Employee Share Trust, the
consideration paid, including any directly attributable
incremental costs (net of income taxes) is recorded in
the share-based payment trust reserve until the shares
are cancelled or reissued. Where such ordinary shares
are subsequently reissued, any consideration paid, net of
any directly attributable incremental transaction costs
and the related income tax effects, is transferred to the
share-based payments reserve.
(iv) Termination benefits
Termination benefits are payable when employment is
terminated before the normal retirement date, or when
an employee accepts voluntary redundancy in exchange
for these benefits. The Group recognises termination
benefits when it is demonstrably committed to either
terminating the employment of current employees
according to a detailed formal plan without possibility
of withdrawal or to providing termination benefits
as a result of an offer made to encourage voluntary
redundancy. Benefits falling due more than 12 months
after the end of the reporting period are discounted to
present value.
(v) Bonus plans
The Group recognises a liability and expense for bonuses
based on a formula that takes in to consideration the
profit attributable to the Group’s shareholders after
certain adjustments. The Group recognises a provision
where contractually obliged or where there is a past
practice that has created a constructive obligation.
(vi) Defined benefit and defined
contribution plans
As part of the merger arrangements, the Group entered
into a Superannuation Deed with Qantas Airways
Limited setting out the arrangements which would apply
(post-merger) to employees of the Group that are also
members of the Qantas Superannuation Plan (divisions
of which are in the nature of Defined Benefit Plan).
Under the deed, HLO assumed responsibility for the plan
assets and plan liabilities for these members in a new
Defined Benefit Plan controlled and managed by HLO.
The plan assets and liabilities were transferred to HLO
on 25 July 2011. On transfer to HLO, the plan was fair
valued using HLO specific assumptions which resulted in
the plan having a net asset position of $1.0m. This was
recorded as an adjustment against goodwill as part of the
final acquisition accounting for the merger transaction.
Following initial recognition, the Group has applied AASB
119 Employee Benefits to account for movements in plan
assets and liabilities with subsequent actuarial gains and
losses recognised directly in equity in accordance with
AASB 119.
The liability or asset recognised in the balance sheet in
respect of defined benefit superannuation plans is the
present value of the defined benefit obligation at the end
of the reporting period less the fair value of plan assets.
The defined benefit obligation is calculated annually
by independent actuaries using the projected unit
credit method.
The present value of the defined benefit obligation is
determined by discounting the estimated future cash
outflows using market yields of government bonds that
are denominated in the currency in which the benefits
will be paid, and that have terms approximating to the
terms of the related obligation. In countries where
there is a deep market in high quality corporate bonds,
the market rates on those bonds are used rather than
government bonds.
Remeasurement gains and losses arising from experience
adjustments and changes in actuarial assumptions are
recognised in the period in which they occur, directly
in other comprehensive income. They are included in
retained earnings in the statement of changes of equity
and in the consolidated statement of financial position.
Changes in the present value of the defined benefit
obligation resulting from plan amendments or
curtailments are recognised immediately in profit or loss
as past service costs.
Contributions to the defined contribution section of
the Group’s superannuation fund and other independent
defined benefit contribution funds are recognised as an
expense as they become payable. Prepaid contributions
are recognised as an asset to the extent that a cash
refund or a reduction in the future payments is available.
69
(r) Contributed equity
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax,
from the proceeds.
(s) Earnings per share (EPS)
Basic EPS amounts are calculated by dividing net profit
for the year attributable to ordinary equity holders of the
parent entity by the weighted average number of ordinary
shares outstanding during the year.
Diluted EPS adjusts the weighted average number
of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive
potential ordinary shares.
(t) Income tax
Income tax expense or revenue on the profit or loss for
the year comprises current and deferred tax. Current
tax includes any adjustment to tax payable in respect of
previous years.
Current tax assets and liabilities for the current and
prior periods are measured at the amount expected to
be recovered from or paid to the taxation authorities
based upon the current period’s taxable income. The tax
rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the balance
sheet date.
Deferred income tax is provided on all temporary timing
differences at the balance date between tax bases of
assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred tax liabilities are recognised for all taxable
temporary differences except when:
• the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in a
transaction that is not a business combination and
that, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; or
• the taxable temporary difference is associated with
investments in subsidiaries, and the time of the
reversal of the temporary difference can be controlled
and it is probable that the temporary differences will
not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible
temporary differences, carry-forward or unused tax
credits and unused tax losses, to the extent that it is
probable that the taxable profit will be available against
which the deductible temporary differences, and the
carry-forward of unused tax credits and unused tax
losses can be utilised except when:
• the deferred tax assets relating to the deductible
temporary difference arises from the initial
recognition of an asset or liability in a transaction
that is not a business combination and, at the time
of the transaction, affects neither the accounting
profit nor taxable profit or loss; or
• the deductible temporary difference is associated
with investments in subsidiaries, in which case a
deferred tax asset is only recognised to the extent
that it is probable that the temporary difference
will reverse in the foreseeable future and taxable
profit will be available against which the temporary
differences can be utilised.
The carrying amount of deferred tax assets is reviewed
at each balance date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred income tax
asset to be utilised.
Unrecognised deferred tax assets are reassessed at
each balance sheet date and are recognised to the extent
that it has become probable that future taxable profit
will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured based
on the expected manner of realisation or settlement
of the carrying amount of assets and liabilities, using
tax rates that are expected to apply to the year when
the asset is realised or the liability settled, based
on tax rates and tax laws that have been enacted or
substantially enacted at the balance sheet date.
Income taxes relating to items recognised directly in
equity are recognised in equity and not in the income
statement.
Deferred tax assets and liabilities are offset only if a
legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred
tax assets and liabilities relate to the same taxable
entity and the same taxation authority.
helloworldlimited.com.au (i) Tax consolidation legislation
Helloworld Limited and its wholly owned Australian
controlled entities have implemented the tax
consolidation legislation.
The head entity, Helloworld Limited, and its 100%
wholly-owned subsidiaries in the Australian income tax
consolidated group account for their own current and
deferred tax amounts. These tax amounts are measured
as if each entity in the Australian income tax consolidated
group continues to be a standalone taxpayer in its
own right.
In addition to its own current and deferred tax amounts,
Helloworld Limited also recognises the current tax
liabilities (or assets) and the deferred tax assets arising
from unused tax losses and unused tax credits assumed
from controlled entities in the Australian income tax
consolidated group where applicable.
Assets or liabilities arising under tax financing
arrangements with the Australian income tax
consolidated entities are recognised as amounts
receivable from or payable to other entities in the Group.
(ii) Nature of tax funding arrangements
and tax sharing agreements
The head entity, in conjunction with the other 100%
wholly owned subsidiary members of the Australian
income tax consolidated group, has entered into a
tax funding arrangement which sets out the funding
obligations of members of the Australian income tax
consolidated group in respect of the group’s tax liability.
The tax funding arrangements require payments to/from
the head entity equal to the current tax liability/(asset)
assumed by the head entity and any tax loss deferred tax
asset assumed by the head entity, resulting in the head
entity recognising an intercompany receivable/(payable)
equal in amount to the tax liability/(asset) assumed. The
intercompany receivable/(payable) is at call.
Contributions to fund the current tax liabilities are
payable as per the tax funding arrangements and reflect
the timing of the head entity’s obligation to make
payments for tax liabilities to the relevant tax authorities.
The head entity, in conjunction with the other members
of the Australian income tax consolidated group, has also
entered into a tax sharing arrangement which provides
for the determination of the allocation of income tax
liabilities between the entities should the head entity
default on its tax payment obligations. No amounts
have been recognised in the financial statements in
respect of this agreement, as payment of any amounts
by subsidiary members under the tax sharing agreement
is considered remote.
(u) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of
the amount of GST except where the GST incurred on
a purchase of goods and services is not recoverable
from the taxation authority, in which case the GST is
recognised as part of the cost of acquisition of the asset
or as part of the expense item as applicable.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables
or payables in the statement of financial position.
Cash flows are included in the statement of cash flows
on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is
recoverable from, or payable to, the taxation authority is
classified as operating cash flows.
Commitments and contingencies are disclosed net of the
amount of GST recoverable, or payable to, the taxation
authority.
(v) Derivatives and hedging instruments
The Group holds derivative financial instruments to
hedge its foreign currency exposures.
On initial designation of the hedge, the Group formally
documents the relationship between the hedging
instruments and the hedged items, including the risk
management objectives and strategy in undertaking
the hedge transaction, together with the methods that
will be used to assess the effectiveness of the hedging
relationship. The Group makes an assessment, both at the
inception of the hedge relationship as well as on an ongoing
basis, whether the hedging instruments are expected to be
“highly effective” in offsetting the changes in the fair value
or cash flows of the respective hedged items during the
period for which the hedge is designated, and whether the
actual results of each hedge are within a range of 80-125
percent. For a cash flow hedge of a forecast transaction,
the transaction should be highly probable to occur and
should present an exposure to variations in cash flows that
could ultimately affect reported net income.
Derivatives are recognised initially at fair value;
attributable transaction costs are recognised in profit
and loss as incurred. Subsequent to initial recognition,
derivatives are measured at fair value and changes
therein are accounted for as described below.
71
Cash flow hedges
Changes in the fair value of the derivative hedging
instrument designated as a cash flow hedge are
recognised in other comprehensive income to the
extent that the hedge is effective. To the extent that
the hedge is ineffective, changes in fair value are
recognised in the income statement.
If the hedging instrument no longer meets the criteria
for hedge accounting, expires or is sold, terminated or
exercised, or the designation is revoked, then hedge
accounting is discontinued prospectively. The cumulative
gain or loss previously recognised in other comprehensive
income and presented in the hedging reserve in equity
remains there until the forecast transaction affects
the income statement. When the hedged item is a
non-financial asset, the amount recognised in other
comprehensive income is transferred to the carrying
amount of the asset when the asset is recognised. If the
forecast transaction is no longer expected to occur, then
the balance in other comprehensive income is recognised
immediately in profit or loss. In other cases the amount
recognised in other comprehensive income is transferred
to profit or loss in the same period that the hedged item
affects the income statement.
(w) Investments and other financial
assets
Investments and other financial assets are categorised
as financial assets at fair value through profit or loss,
loans and receivables, held-to-maturity investments
or available for sale financial assets. The classification
depends on the purpose for which the investments were
acquired. Classification is re-evaluated at each financial
year end, but there are restrictions on reclassifying to
other categories.
When financial assets are recognised initially, they are
measured at fair value plus, in the case of assets not at
fair value through profit or loss, directly attributable
transaction costs.
Recognition and de-recognition
Purchases and sales of financial assets are recognised on
the trade date, that is, the date that the Group commits
to purchase or sell the asset. Regular purchases or sales
are purchases or sales of financial assets under contracts
that require delivery of the assets within the period
established generally by regulation or convention in the
market place.
Financial assets are de-recognised when the right to
receive cash flows from the financial assets has expired
or been transferred and the Group has transferred
substantially all the risks and rewards of ownership.
(x) Prepayments
Prepayments consist of travel products purchased for
bookings that have not yet been ticketed and prepaid
operating expenditure. Prepayments of travel products
are recognised as part of the net amount of commissions
received in the income statement at the ticketing date
of the applicable booking, in line with the revenue
recognition policy. Other amounts included in the balance
of prepayments relate to prepaid operating expenditure.
(y) Inventories
Inventories are stated at the lower of cost and net
realisable value. Costs of purchased inventory are
determined after deducting rebates and discounts.
Net realisable value is the estimated selling price
in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary
to make the sale.
(z) Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in the income statement over the
period of the borrowings using the effective interest
method. Fees paid on the establishment of the loan
facilities, which are not an incremental cost relating to
the actual drawing down of the facility, are netted against
the loan liability and amortised on a straight-line basis
over the term of the facility.
Borrowings are removed from the statement of financial
position when the obligation specified in the contract is
discharged, cancelled or expires. The difference between
the carrying amount of the financial liability that has
been extinguished or transferred to another party and
the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit
or loss as other income or finance costs.
Borrowings are classified as current liabilities unless
the Group has an unconditional right to defer settlement
of the liability for at least 12 months after the
reporting date.
helloworldlimited.com.au (aa) Borrowing costs
Borrowing costs incurred for the construction of any
qualifying asset are capitalised during the period of
time that is required to complete and prepare the asset
for its intended use or sale. Other borrowing costs are
recognised in profit or loss.
(ab) Investment property
Investment property is held for long term rental yields
and is not occupied by the Group. Investment property
is carried at fair value. When measuring the fair value of
investment property the Group ensures that the fair value
reflects, among other things, rental income from current
leases and other assumptions that market participants
would use when pricing the investment property under
current market conditions. Changes in fair values are
recorded in profit or loss as part of other income.
(ac) Predecessor accounting reserve
Business combinations involving entities under common
control are accounted for using the predecessor
accounting method. Under this method, carrying values
are not restated in the accounts of the acquiring entity,
rather prior book values are maintained, including
any goodwill previously recognised in relation to the
acquired entities. As a result, no fair value adjustments
are recorded on the acquisition. Any difference between
consideration provided and the carrying value of net
assets acquired is recorded as a separate element
of equity.
(ad) Parent entity financial information
On 30 September 2010, Helloworld Limited and its
controlled entities completed a 50-50 Merger with Stella
Travel Services Holdings Pty Limited and its controlled
entities (STS) in which the businesses of HLO and STS
were combined into one consolidated group (‘the Group”).
In accordance with accounting standards, this Merger
has been accounted for as a reverse acquisition with STS
being deemed the acquirer for accounting purposes. The
financial information for the (legal) parent entity, HLO is
disclosed in note 29 and has been prepared on the same
basis as the consolidated financial statements, except as
set out below.
(i) Investments in subsidiaries and
associates
Investments in subsidiaries and associates are
accounted for at cost in the Financial Statements of
Helloworld Limited.
(ii) Tax consolidation legislation
Helloworld Limited (HLO) and its wholly-owned
Australia controlled entities have implemented the tax
consolidation legislation.
The head entity of the tax consolidated group is HLO,
which in addition to recognising its own current and
deferred tax amounts also recognises the current tax
liabilities (or assets) and the deferred tax assets arising
from unused tax losses and unused tax credits assumed
from controlled entities in the tax consolidated group.
The consolidated tax balances are disclosed in the result
of HLO (legal parent) and are not recorded in the result
of the deemed acquirer STS.
The entities have also entered into a tax funding
agreement under which the wholly owned entities fully
compensate HLO for any current tax payable assumed
and are compensated by HLO for any current tax
receivable and deferred tax assets relating to unused
tax losses or unused tax credits that are transferred
to HLO under the tax consolidation legislation. The
funding amounts are determined by reference to the
amounts recognised in the wholly-owned entities
financial statements.
The amounts receivable/payable under the tax funding
arrangement are due upon receipt of the funding advice
from the head tax entity, which is issued as soon as
practicable after the end of each financial year. The
head tax entity may also require payment of interim
funding amounts to assist with its obligations to pay
tax instalments.
Under this tax consolidation arrangement, individual
legal entities continue to account for their own current
and deferred tax amounts. These amounts are measured
as if the entities were stand-alone tax payers in their own
right. Assets or liabilities arising from the tax funding
agreement with HLO are recognised as a current amount
receivable or payable to HLO. Any difference in the
amounts assumed and the amount receivable or payable
to HLO, are shown as a contribution to, (or distribution
from) the head tax entity HLO in the results of the
individual legal entities.
73
(iii) Financial guarantees
Where the parent has provided financial guarantees
in relation to loans and payables of subsidiaries for no
compensation, the fair values of these guarantees are
accounted for as contributions and recognised as part
of the cost of investment.
(iv) Share-based payments
The grant by the Company (under the Helloworld Limited
Performance Rights Plan) of Performance Share Rights
(PRs) to acquire shares, to certain executives of the
Group is treated as a capital contribution to HLO. The
fair value of the PRs is calculated taking into account the
share price on grant date and the exercise price. The PRs
are subject to EPS Performance conditions. Further detail
of the Helloworld Limited Performance Rights Plan is
disclosed in note 32 and Note 3(q)(iii).
Where any group company or trust purchases the
Company’s equity instruments, for example purchases
of shares by Helloworld Employee Share Trust, the
consideration paid, including any directly attributable
incremental costs (net of income taxes) is recorded in
the share-based payment trust reserve until the shares
are cancelled or reissued. Where such ordinary shares
are subsequently reissued, any consideration paid, net of
any directly attributable incremental transaction costs
and the related income tax effects, is transferred to the
share-based payments reserve.
helloworldlimited.com.au 4. Revenues and expenses
(a) Revenue
Rendering of services
Finance income
Rents and sub-lease rentals
Other revenue
TOTAL REVENUE
(b) Expenses
Depreciation (note 13)
Amortisation (note 14)
Impairment losses on trade receivables
Net foreign exchange losses/(gains)
Defined contribution superannuation expense
Defined benefit expense
Other employee benefit expenses
Business transformation costs
CEO resignation/retirement costs
Impairment of goodwill (note 14)
Costs relating to GST matter (note 7(g))
Net gain on disposal of plant and equipment
Loss on disposal of investments (note 31)
Fair value loss on investment property
VAT settlement
1 Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies.
5. Finance income and expense
Recognised in profit or loss
Finance income recognised in revenue
Finance expenses
NET FINANCE INCOME RECOGNISED IN PROFIT OR LOSS
CONSOLIDATED
2014
$’000
2013
$’000
(restated)1
285,707
5,073
106
785
324,488
6,085
161
2,029
291,671
332,763
5,763
8,269
207
1,136
7,057
922
124,548
15,847
608
59,500
2,738
(7)
5,473
–
–
5,960
4,845
216
1,572
8,149
1,208
142,795
10,785
797
–
31
(34)
–
246
606
CONSOLIDATED
2014
$’000
2013
$’000
5,073
(3,354)
1,719
6,085
(3,601)
2,484
75
6. Segment reporting
(a) Description of segments
The Group has identified the following three operating segments as reportable segments. Operating segments are
identified based on the internal reports that are reviewed and used by the Board in assessing performance and making
strategic decisions. There are no other operating segments other than the three below:
• Retail
• Wholesale
• Travel Management
The operations of Retail primarily comprise acting as a franchisor of retail travel agency networks including helloworld,
helloworld American Express, Harvey World Travel, Travelscene, Jetset Travel, Travelworld and United Travel. Other
businesses in the Retail segment include Air Tickets and helloworld.com.au. The primary purpose of Wholesale is to
procure air, sea and land product for packaging and sale through retail travel agency networks. Travel Management
provides travel management services to corporate and government customers including the booking of flights and
accommodation.
Corporate charges are only allocated to operating segments to the extent that they are considered part of the core
operations of any segments.
The Board assess the performance of the operating segments based on a measure of Adjusted EBITDAI (earnings
before interest expense, tax, depreciation, amortisation, impairment and share-based payments). This measurement
basis excludes the effects of significant unusual income and expenditure from the operating segments such as
fair value gains or losses on investments, restructuring and business transformation costs, legal fees, merger or
acquisition-related transaction costs and impairments when these items are outside the ordinary course of business
or are unusual due to their size, nature or incidence. Furthermore, the measure excludes the effects of any equity-
settled share-based payments. Interest income on client funds is included within segment revenue and Adjusted
EBITDAI according to Group accounting policy.
TTV
Total Transaction Value (TTV) does not represent revenue in accordance with Australian Accounting Standards. TTV
represents the price at which travel products and services have been sold across the Group’s various operations,
as agents for various airlines and other service providers, plus revenue from other sources. The Group’s revenue is,
therefore, derived from TTV. Total TTV does not represent the Group’s cash inflows as some transactions are settled
directly between the customer and the supplier.
(b) Segment information provided to the Board
ANALYSIS BY SEGMENT
YEAR ENDED 30 JUNE 2014
TTV
Total segment revenue
Operating expenses
ADJUSTED EBITDAI
YEAR ENDED 30 JUNE 2013 (RESTATED1)
TTV
Total segment revenue
Operating expenses
ADJUSTED EBITDAI
Retail
$’000
Wholesale
$’000
Travel
Management
$’000
Corporate
Unallocated
$’000
Consolidated
$’000
3,586,527
160,686
(110,148)
50,538
3,766,103
183,024
(115,445)
67,579
708,229
88,596
(76,189)
12,407
799,255
104,731
(91,114)
13,617
566,276
37,505
(36,992)
513
612,065
39,687
(42,220)
(2,533)
–
4,861,032
4,884
(27,781)
(22,897)
291,671
(251,110)
40,561
–
5,177,423
5,321
(29,843)
(24,522)
332,763
(278,622)
54,141
1 Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies.
helloworldlimited.com.au (c) Other segment information
(i) Segment revenue
The parent entity is domiciled in Australia. The amount of its revenue from external customers in Australia is
$222,866,359 (2013: $269,831,765), and the total revenue from external customers in other countries is $68,804,272
(2013: $62,931,139). Segment revenues are allocated based on the country in which the customer is located.
All segments derive a significant amount of revenue from Qantas Airways Limited, a related entity. Details of
transactions are outlined in note 26.
(ii) Adjusted EBITDAI
A reconciliation of Adjusted EBITDAI to (loss)/profit before income tax is provided as follows:
ADJUSTED EBITDAI
Loss on disposal of investments
Business transformation costs
Share-based payments
Costs relating to GST matter (note 7(g))
Costs relating to disposal of investments
VAT settlement
Fair value loss on Investment Property
CEO resignation/retirement costs
EBITDAI
Depreciation
Amortisation
Impairment of goodwill
Finance costs
(LOSS)/PROFIT BEFORE INCOME TAX
CONSOLIDATED
2014
$’000
40,561
(5,473)
2013
$’000
(restated)1
54,141
–
(15,847)
(10,785)
(115)
(2,738)
(60)
–
–
(608)
15,720
(5,763)
(8,269)
(59,500)
(3,354)
(61,166)
(616)
(31)
–
(606)
(246)
(797)
41,060
(5,960)
(4,845)
–
(3,601)
26,654
1 Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies.
(iii) Segment assets
The amounts provided to the Board with respect to total assets are measured in a manner consistent with that of the
Consolidated Financial Statements. These reports do not allocate assets based on the operations of each segment or by
geographical location.
The total of non-current assets other than financial instruments, deferred tax assets and defined benefit assets located
in Australia is $349,928,856 (2013: $411,009,283), and the total of these non-current assets located in other countries
is $33,298,377 (2013: $34,836,513). Under the current management reporting framework, total assets are not
allocated to a specific reporting segment or geographic location.
(iv) Segment liabilities
The amounts provided to the Board with respect to total liabilities are measured in a manner consistent with that
of the Financial Statements. These reports do not allocate liabilities based on the operations of each segment or by
geographical location and are reported to the Board on a consolidated basis.
77
(v) Changes in accounting policy and restatement of error in prior period
The segment disclosures were affected by the adoption of AASB119 Employee Benefits, which resulted in changes to
the Group’s accounting policies and required a restatement of the previously reported segment information. As a result
for the year ended 30 June 2013 the Wholesale Segment operating expense increased by $479,000 and the Wholesale
Segment Adjusted EBITDAI decreased by $479,000.
The segment disclosures of Non-current assets were affected by the restatement of Intangible Assets and subsequent
re-measurement of the carrying value of the Deferred Tax Liability (being offset against the Deferred Tax Asset) in the
1 July 2012 Opening Balance Sheet. As a result for the year ended 30 June 2013 the disclosure for non-current assets
located in other countries (refer Note 6(c)(iii)) decreased by $6,475,499.
7. Income tax
CONSOLIDATED
2014
$’000
2013
$’000
(restated)1
(a) Income tax expense
The major components of income tax expense/(benefit) recognised in the income statement are:
CURRENT TAX EXPENSE
Current income tax expense
Adjustments in respect of current tax expense of previous years
DEFERRED INCOME TAX
Relating to origination and reversal of temporary differences
INCOME TAX EXPENSE REPORTED IN THE INCOME STATEMENT
Deferred income tax expense included in income tax expense comprises:
(Increase)/decrease in deferred tax assets (note 15)
(Decrease)/increase in deferred tax liabilities (note 15)
2,132
(248)
193
2,077
(44)
237
193
(b) Reconciliation between income tax expense and profit before income tax:
(61,166)
(LOSS)/PROFIT BEFORE INCOME TAX EXPENSE
Prima facie income tax (credit)/expense at 30% (2013: 30%)
(18,350)
Add/(deduct):
Non-deductible (taxable) items:
Amortisation
Loss on disposal of investments
Impairment of goodwill
Assessable debt forgiveness between group members
Non-deductible VAT settlement
Income tax settlement regarding prior tax group (note 7(g))
Current year tax losses not recognised
Prior year tax losses (recognised)/de-recognised
(Over)/under provision in prior years
Other
INCOME TAX EXPENSE REPORTED IN THE INCOME STATEMENT
1 Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies.
673
1,650
17,850
445
–
–
221
(247)
(248)
83
2,077
10,183
289
(178)
10,294
476
(654)
(178)
26,654
7,996
16
–
–
–
134
1,250
198
169
289
242
10,294
helloworldlimited.com.au
CONSOLIDATED
2014
$’000
2013
$’000
(restated)1
(c) Tax expense/(income) relating to items of other comprehensive income
Cash flow hedges
Defined benefit pension – actuarial gains/(losses)
(d) Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30%
1 Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies.
(873)
494
(379)
586
176
679
1,150
1,829
1,818
545
All unused tax losses were incurred by non-Australian entities that are not part of the tax consolidated group
(e) Amounts recognised directly in equity
There are no amounts of current and deferred tax recognised directly in equity (2013: $nil).
(f) Unrecognised temporary differences
The Group has undistributed earnings which if paid out as dividends would be non-assessable exempt income and not
subject to tax in the hands of the recipient. Therefore no deferred tax liability has been recorded in relation to the
undistributed earnings.
(g) Other tax matters
As previously disclosed in the Consolidated Interim Financial Report for the half year ended 31 December 2010 and in
each Financial Report thereafter, two entities within the tax consolidated group lodged claims in the Federal Court of
Australia against the Commissioner of Taxation (‘the Commissioner’) in relation to a GST matter. The GST claim related
to the operations of the inbound travel business, ATS Pacific Pty Ltd. As disclosed in note 31, this business was sold to
the AOT Group Limited on 30 September 2013.
This matter was heard in the Federal Court on 26 June 2012 and judgement on the case received on 15 April 2013.
The decision that was handed down did not result in a material one-off benefit to the Group and did not have a material
impact on the Group’s earnings. An appeal was lodged by the Group on 5 June 2013 and the matter was heard on
20 November 2013. The appeal decision was handed down by the Federal Court on 27 March 2014 and found in favour
of the Commissioner. Following this, on 23 April 2014, the Group lodged an application to seek special leave to appeal
to the High Court. A date for the special leave application has not yet been set and an appeal to the High Court will only
be available to the Group if the special leave application is granted. Legal expenses in relation to this matter continue to
be expensed as incurred and are shown in Note 4 for the current year. As part of the Court proceedings, the parties were
ordered to agree on the quantum of the claim before the Court. Helloworld’s claim against the ATO was agreed to be
$19,076,351. These funds have previously been paid by Helloworld to the Australian Tax Office.
Given that it is not possible for the Group to properly assess the likelihood of the special leave application and the
outcome of any appeal to the High Court, the Group has followed the decision of the Federal Court. As a result, at
30 June 2014, a non-recurring before tax expense of $2,400,000 has been recorded in the Consolidated Income
Statement of the Group. This amount is net of any interest, costs or penalties which are unable to be determined at
this time. In addition, the Group will be required to remit GST that has been withheld during the process of this claim.
The GST that has been withheld has been separately retained in client cash rather than general company cash. There
is no material ongoing impact on profitability as a consequence of this decision given the Group no longer operates
an inbound travel business.
79
8. Dividends paid and proposed
(a) Interim dividend
Fully franked dividend (1.0 cents per share, paid 2 April 2013)
(b) Final dividend
PRIOR YEAR FINAL DIVIDEND
Fully franked dividend (0.5 cents per share, paid 4 October 2013)
(c) Franking credit balance
The franked portions of any future dividends paid after 30 June 2014 will be franked out
of existing franking credits or out of franking credits arising from the payment of income
tax in the year ending 30 June 2015. The amount of franking credits available for the
subsequent financial years are:
– franking account balance as at year end at 30%
– franking credits that will arise from income tax payable as at year end
– impact on the franking account of dividends expected to be paid after the balance
sheet date and not recognised as a distribution to equity holders during the period
CONSOLIDATED
2014
$’000
–
–
2,203
2,203
2013
$’000
4,400
4,400
–
–
30,229
485
–
30,714
25,353
6,408
(943)
30,818
The Company has stated that its policy is to pay a dividend payout ratio in the range of 40–60% of net profit after tax.
In the first half of the financial year ended 30 June 2014, the Company generated a net loss after tax and did not pay an
interim dividend. In accordance with the Company’s dividend policy, the Board has determined that the Company will not
pay a final dividend in relation to the financial year ended 30 June 2014.
In relation to the final dividend paid during the year, the tax rate at which dividends were franked is 30%. The level of
franking was 100%.
The ability to utilise the franking credits is dependent upon the Company meeting solvency based tests for payment
of dividends set out in the Corporations Amendments (Corporate Reporting Reform) Act 2010. In accordance with tax
consolidation legislation, the Company, as the head entity in the tax consolidated group, has assumed the benefit of
franking credits of all entities.
helloworldlimited.com.au 9. Earnings per share (EPS)
The calculation of basic EPS for the year ended 30 June 2014 was based on the loss attributable to ordinary
shareholders of $63.3 million (2013: profit of $16.2 million)1 and a weighted average number of ordinary shares
outstanding of 440,418,163 (2013: 439,681,876).
CONSOLIDATED
2014
cents
2013
cents
(restated)1
(a) Basic (loss)/earnings per share
Total basic (loss)/earnings per share from continuing operations attributable to
ordinary equity holders of the Company
(14.38)
3.68
(b) Diluted (loss)/earnings per share
Total diluted (loss)/earnings per share from continuing operations attributable to
ordinary equity holders of the Company
(14.38)
3.63
1 Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies.
CONSOLIDATED
2014
$’000
2013
$’000
(restated)1
(c) Reconciliations of (loss)/earnings used in calculating (loss)/earnings per share
Net (loss)/profit for the year from continuing operations attributable to the ordinary equity
holders of the Company
(63,347)
16,180
(d) Weighted average number of shares used as the denominator
Weighted average number of shares1 used as the denominator in calculating
basic (loss)/earnings per share
Adjustments for calculation of diluted earnings per share:
Weighted average number of potential ordinary shares issued as part of the
Group’s Long Term Incentive Plan
Weighted average number of ordinary shares and potential ordinary shares used
as the denominator in calculating diluted (loss)/earnings per share
440,418,163
439,681,876
–
5,846,658
440,418,163
445,528,534
1 Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies.
The Company has potential ordinary shares with a weighted average of 6,122,096 that could potentially dilute basic
EPS in the future, but were not included in the calculation of diluted EPS because they are antidilutive for the year ended
30 June 2014.
(e) Information concerning the classification of securities
The Company has 440,548,572 fully paid ordinary shares on issue.
81
10. Cash and cash equivalents
Cash at bank and on hand
Client cash
CASH AND CASH EQUIVALENTS IN THE STATEMENTS OF CASH FLOWS
CONSOLIDATED
2014
$’000
28,469
155,851
184,320
2013
$’000
34,483
200,451
234,934
Cash at bank earns interest at floating rates based on daily bank deposit rates.
At 30 June 2014, there was no cash (2013: $0.1 million) held by the Group being pledged as collateral under the terms of
various operational financing facilities.
Client cash includes all monies entrusted to the Group by intending travellers or customers prior to travelling. A
corresponding liability is recorded on the consolidated statement of financial position while the cash is held on the
clients’ behalf prior to being paid to principals. In Australia, client cash is deposited into an account held exclusively for
client funds, separate to the general funds of the entity.
The Group’s exposure to interest rate risk is discussed in note 24. The maximum exposure to credit risk at the end of the
reporting period is the carrying amount of each class of cash and cash equivalents disclosed above.
11. Trade and other receivables
Trade receivables
Provision for impairment of trade receivables
Accrued income
Prepayments
Other receivables
CONSOLIDATED
2014
$’000
52,722
(795)
51,927
35,338
12,207
5,998
2013
$’000
63,725
(918)
62,807
36,086
9,693
3,915
105,470
112,501
Trade receivables are non-interest bearing and are generally on 30 day terms.
Related party receivables
For terms and conditions of related party receivables, refer to note 26.
Fair value and credit risk
Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value.
The maximum exposure to credit risk is the fair value of the receivables. Collateral is not held as security, nor is it the
Group’s policy to transfer receivables to special purpose entities.
Credit, foreign exchange and interest rate risk
Details regarding credit, foreign exchange and interest rate risk exposure are disclosed in note 24.
helloworldlimited.com.au 12. Investments accounted for using the equity method
Investment in associates1
Provision for diminution in value
CARRYING AMOUNT AT END OF FINANCIAL YEAR
1 Refer to note 28 for details of Investments in Associates
(a) Movements in carrying amounts
CARRYING AMOUNT AT THE BEGINNING OF THE FINANCIAL YEAR
Share of profits after income tax
Dividends received/receivable
Other Movements
CARRYING AMOUNT AT END OF FINANCIAL YEAR
CONSOLIDATED
2014
$’000
1,580
(638)
942
2013
$’000
1,800
(979)
821
CONSOLIDATED
2014
$’000
821
165
(48)
4
942
2013
$’000
730
136
(185)
140
821
(b) Summarised financial information for associates
The Group’s share of the results of its principal associates and its aggregated assets and liabilities are as follows:
GROUP’S SHARE OF:
Assets
Liabilities
NET ASSETS
Revenue
NET PROFIT AFTER TAX
CONSOLIDATED
2014
$’000
1,613
(691)
922
2,055
165
2013
$’000
1,669
(500)
1,169
2,135
136
(c) Contingent liabilities of Associates
There are no contingent liabilities in associate investments for which the Group has a legal obligation to settle.
83
13. Property, plant and equipment
AT 30 JUNE 2012
Cost
Accumulated depreciation
NET BOOK AMOUNT
BALANCE AT 1 JULY 2012
Additions
Disposals
Transfer in/(out)
Foreign currency differences
Depreciation charge (note 4)
BALANCE AT 30 JUNE 2013
AT 30 JUNE 2013
Cost
Accumulated depreciation
NET BOOK AMOUNT
BALANCE AT 1 JULY 2013
Additions
Disposals
Amounts included in businesses disposed of
Foreign currency differences
Depreciation charge (note 4)
BALANCE AT 30 JUNE 2014
AT 30 JUNE 2014
Cost
Accumulated depreciation
NET BOOK AMOUNT
Land and
buildings
Office
equipment
Leasehold
improvements
$’000
$’000
$’000
Total
$’000
684
(44)
640
640
14
–
–
46
(36)
664
751
(87)
664
664
–
–
(661)
7
(10)
–
–
–
–
23,402
(6,255)
17,147
13,908
(3,742)
10,166
37,994
(10,041)
27,953
17,147
10,166
27,953
2,024
(435)
(359)
207
(3,340)
15,244
23,806
(8,562)
15,244
15,244
4,199
(35)
(2,184)
114
(4,022)
13,316
22,738
(9,422)
13,316
851
(242)
14
121
(2,584)
8,326
13,591
(5,265)
8,326
8,326
688
(165)
(88)
160
(1,731)
7,190
13,697
(6,507)
7,190
2,889
(677)
(345)
374
(5,960)
24,234
38,148
(13,914)
24,234
24,234
4,887
(200)
(2,933)
281
(5,763)
20,506
36,435
(15,929)
20,506
(a) Assets in the course of construction
The carrying amount of the assets disclosed include the following expenditure in relation to property, plant and
equipment which is in the course of construction:
Office equipment
Leasehold improvements
TOTAL ASSETS IN THE COURSE OF CONSTRUCTION
(b) Non-current assets pledged as security
Refer to note 17 for non-current assets pledged as security by the Group.
CONSOLIDATED
2014
$’000
253
-
253
2013
$’000
140
9
149
helloworldlimited.com.au 14. Intangible assets
Goodwill
Franchise
systems
Brand
names Trademarks
Software,
website
and other1
$’000
$’000
$’000
$’000
$’000
Total
$’000
AT 30 JUNE 2012 (RESTATED2)
Cost
Accumulated amortisation and impairment
NET BOOK AMOUNT
327,479
(27,648)
299,831
97,400
–
97,400
3,003
(263)
2,740
5,561
(1,051)
4,510
16,284
(5,578)
10,706
449,727
(34,540)
415,187
BALANCE AT 1 JULY 2012 (RESTATED2)
299,831
97,400
2,740
4,510
10,706
415,187
Additions
Disposals
Foreign currency differences
Amortisation charge (note 4)
Transfer in/(out)
BALANCE AT 30 JUNE 2013
–
–
2,118
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,023
(3)
46
(581)
(4,264)
–
345
7,023
(3)
2,164
(4,845)
345
301,949
97,400
2,740
3,929
13,853
419,871
AT 30 JUNE 2013 (RESTATED)
Cost
Accumulated amortisation and impairment
NET BOOK AMOUNT
BALANCE AT 1 JULY 2013
Additions
Additions through business combinations
Disposals
Impairment charge3 (note 4)
Amounts included in businesses disposed of
Foreign currency differences
Amortisation charge (note 4)
330,211
(28,262)
301,949
97,400
–
97,400
301,949
97,400
–
–
–
(59,500)
(8,375)
2,427
–
–
–
–
–
–
–
–
BALANCE AT 30 JUNE 2014
236,501
97,400
3,003
(263)
2,740
2,740
457
–
–
–
–
–
5,561
24,062
(1,632)
(10,209)
3,929
13,853
3,929
–
–
–
–
–
–
13,853
11,332
2,555
(83)
–
–
66
(1,672)
1,525
(680)
3,249
(5,917)
21,806
460,237
(40,366)
419,871
419,871
11,789
2,555
(83)
(59,500)
(8,375)
2,493
(8,269)
360,481
AT 30 JUNE 2014
Cost
Accumulated amortisation and impairment
NET BOOK AMOUNT
324,810
(88,309)
236,501
97,400
–
97,400
3,460
(1,935)
1,525
5,561
33,838
465,069
(2,312)
(12,032)
(104,588)
3,249
21,806
360,481
1
Software, website and other includes capitalised software and development costs, as well as other costs associated with the development
and/or acquisition of rights to intellectual property.
2 Refer to Note 14(b) for details regarding the restatement.
3 The carrying value of the Retail segment goodwill has been reduced to its recoverable amount through recognition of an impairment loss
against goodwill. This item has been disclosed as a separate item in the Consolidated Income Statement.
85
(a) Impairment tests for goodwill and other indefinite life intangible assets
Goodwill is allocated to the Group’s cash generating units (CGUs) identified according to operating segment.
The franchise system is an indefinite life intangible asset entirely allocated to a CGU within the Retail segment.
A segment level summary of the goodwill allocation is presented below:
Retail
Wholesale
Travel Management
CONSOLIDATED
2014
$’000
169,473
67,028
–
2013
(restated)
$’000
226,754
75,195
–
236,501
301,949
Impairment review
The Group tests whether goodwill and other indefinite life intangible assets have suffered any impairment on an
annual basis.
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow
projections based on the Board approved budget for the next financial year, internal segment level projections covering
the subsequent 4 years and a steady-state terminal value calculation at the end of year 5 which has equivalent revenue
and operating expense growth assumptions equal to inflation expectations of 2.5%. Internal revenue and operating
expense growth projections are also benchmarked against travel industry forecasts and general economic projections
where available.
Key assumptions used for value-in-use calculations
The post-tax cash flows have been discounted at a post-tax rate of 10.9% (2013: 11.0%) per annum which approximates
the Group’s Weighted Average Cost of Capital (WACC). This discount rate has been derived using the Capital Asset
Pricing Model (CAPM) with the following associated inputs:
• Risk free rate: 5.0% (2013: 5.0%)
• Equity market risk premium: 6.0% (2013: 6.0%)
• Beta: 1.2 (2013: 1.2)
• Pre-tax cost of debt: 4.9% (2013: 5.6%)
• Long-term debt ratio: 25% (2013: 25%)
• Segment-specific risk premium: 1.5% (2013: 1.5%)
The equivalent pre-tax discount rate for the Retail segment was 14.2% (2013: 14.6%) and for the Wholesale segment
was 14.3% (2013: 14.7%).
Average nominal revenue growth projections over the forecast period approximate the industry growth rates, with
forecast growth rates for Retail of 2.6% and Wholesale of 3.0% and inflationary increases for operating expenses.
The carrying value of assets for the Retail segment after the goodwill impairment of $59.5 million was $277.4 million.
The impairment charge was a result of the reduction in the Retail network and the resulting impact on forecast earnings.
For the year ended 30 June 2013, the recoverable amount of the Retail segment was estimated to be $374.8 million.
This exceeded the carrying amount of the retail CGU at 30 June 2013 by $30.9 million.
The recoverable amount of the Wholesale segment is estimated to be $91.5 million (2013: $107.9 million). This exceeds
the carrying amount of the Wholesale CGU at 30 June 2014 by $15.7 million (2013: $22.9 million).
helloworldlimited.com.au Impact of possible changes in key assumptions
Value in use assumptions used to consider the recoverable amount of the assets are highly sensitive to changes in
certain key assumptions.
A summary of the impact of changing the key assumptions for the Retail and Wholesale value in use calculations is
outlined below:
Decrease in forecast
cash flows of 10%
Increase in discount rate
from 10.9% to 11.5%
Terminal rate decrease to
from 2.5% to 2%
Retail Segment
Increase in impairment
of $6.2 million
Increase in impairment
of $18.4 million
Increase in impairment
of $11.5 million
Wholesale Segment
No impairment recorded,
with a reduction in headroom
of $2.2 million
No impairment recorded,
with a reduction in headroom
of $6.4 million
No impairment recorded,
with a reduction in headroom
of $3.7 million
Franchise System
The Franchise System is an indefinite life intangible asset entirely allocated to a CGU within the Retail segment.
A description of the nature of the Franchise System asset is contained in Note 3(o)(iv).
The recoverable amount has been assessed at 30 June 2014 using an Excess Earnings calculation, which is consistent
with the methodology originally used to value the asset.
For the year ended 30 June 2014, the recoverable amount of the Franchisee System was estimated to be $125.7 million.
This exceeds the carrying amount at 30 June 2014 by $28.3 million.
Key assumptions used in the Excess Earnings calculation
• Post-tax discount rate: 10.9%.
The post-tax discount rate reflects the risks associated with the asset. The discount rate has been derived using the
Capital Asset Pricing Model (CAPM) and the inputs used in the model are consistent with those outlined above.
• Average nominal revenue growth projections of 3% per annum over the first five years in the forecast period and then
0% per annum thereafter.
• Terminal growth rate: 0%.
• EBITDA margin: 16.3%.
• Capital charges: range from -0.6% to 1.2%.
The equivalent pre-tax discount rate for the Franchise System was 16.4%.
Impact of possible changes in key assumptions:
The assumptions used in the Excess Earnings calculation are most sensitive to the revenue growth projections and the
post-tax discount rate.
In order for an impairment to be recorded in respect of the Franchise System asset:
• Revenue growth would need to decline by 4% per annum over the next five years and then remain stable onwards; or
• The discount rate would need to increase to 13.8%.
87
(b) Restatement of intangible assets
As previously disclosed in the Consolidated Interim Financial Report for the half year ended 31 December 2013, on
acquisition of the Stella Travel Group by Global Voyager Holdings Pty Limited on 28 February 2008, the Best Flights
Brand Name was identified as a separately identifiable intangible asset with a valuation of $41.7 million ascribed.
Following a review of the Group’s identifiable intangible assets, it was discovered that the original methodology for
calculating the valuation of the Brand was inappropriate.
An independent review by valuation experts has been conducted and the valuation of the Best Flights Brand Name at
28 February 2008 was re-performed using a commonly accepted valuation methodology. This valued the Best Flights
Brand Name at $2.7 million at 28 February 2008.
To reflect the correct Best Flights Brand Name value, an amount of $39.0 million has been transferred from Brand
Names to Goodwill within the intangible assets financial statement line item.
As part of the review of intangibles assets, it was also identified that Brand Names relating to the New Zealand
business were incorrectly recorded on the balance sheet as part of the 28 February 2008 acquisition. The nature
of these items and the accounting treatment applied by the Group at the time of the acquisition has been reviewed
considering the Group accounting policies. As a result, the Brand Names relating to the New Zealand business have
been transferred to Goodwill within the intangible assets financial statement line item. In addition, the deferred tax
liability of NZ$7.7 million recorded in relation to the Brand Name balances has been unwound resulting in a decrease
to goodwill of this amount.
As these corrections represent a reclassification within financial statement line items, this has not impacted the net
assets position of Helloworld Limited or the Consolidated Income Statement for the year ending 30 June 2014 or for
any previous periods.
It has been confirmed that the Group would not have recorded any additional impairment expense in the previous
periods had the correct valuation methodologies always been applied.
The restatement has been corrected within the Consolidated Statement of Financial Position at the commencement of
the first comparative period, being 1 July 2012, and for the comparative period, being 30 June 2013, as shown below:
NON-CURRENT ASSETS
Intangibles assets
Deferred tax asset 1
NON-CURRENT LIABILITIES
Deferred tax liabilities
NET ASSETS
1 July
20131
$’000
Impact of
restatement
$’000
1 July 2013
(Restated)
$’000
1 July
2012 1
$’000
Impact of
restatement
$’000
1 July 2012
(Restated)
$’000
426,346
5,858
5,270
441,883
(6,475)
1,205
(5,270)
419,871
7,063
–
–
441,883
421,199
7,494
4,908
423,194
(6,012)
1,104
(4,908)
415,187
8,598
–
–
423,194
1 Post impact of adoption of revised AASB 119 Employee Benefits, as outlined in Note 3(b)(iii).
The restatement has been corrected within the Intangible Assets financial statement line item at the commencement of
the first comparative period, being 1 July 2012, and for the comparative period, being 30 June 2013, as shown below:
INTANGIBLES
Original balance at 1 July 2012
Transfers in/(out)
RESTATED BALANCE AT 1 JULY 2012
Original balance at 30 June 2013
Transfers in/(out)
RESTATED BALANCE AT 30 JUNE 2013
Franchise
Systems
& Rights
$’000
97,400
–
97,400
97,400
Brand
Names
$’000
63,211
(60,471)
2,740
64,866
–
(62,126)
97,400
2,740
Goodwill
$’000
245,372
54,459
299,831
246,298
55,651
301,949
Trademarks
$’000
Software
$’000
Consolidated
$’000
4,510
–
4,510
3,929
–
3,929
10,706
–
10,706
13,853
–
13,853
421,199
(6,012)
415,187
426,346
(6,475)
419,871
helloworldlimited.com.au (c) Reassessment of useful life of Brand Names
During the period, the useful life of the Best Flights Brand Name was revised and as a result amortisation expense
increased by $1,672,000 for the year ending 30 June 2014.
Assuming the asset is held until the end of its useful life, amortisation in the year ending 30 June 2015 will be
$1,021,000.
15. Deferred tax assets and liabilities
Deferred income tax at 30 June relates to the following:
(a) Deferred tax assets
Employee benefits
Payables and accruals
Tax losses
Property, plant and equipment
Other
GROSS DEFERRED TAX ASSETS
Set-off of deferred tax assets and liabilities pursuant to set-off provisions
NET DEFERRED TAX ASSETS
Deferred tax assets expected to be recovered within 12 months
Deferred tax assets expected to be recovered after more than 12 months
(b) Deferred tax liabilities
Deferred revenue
Other
GROSS DEFERRED TAX LIABILITIES
Set-off of deferred tax assets and liabilities pursuant to set-off provisions
NET DEFERRED TAX LIABILITIES
Deferred tax liabilities expected to be settled within 12 months
Deferred tax liabilities expected to be settled after more than 12 months
CONSOLIDATED
2014
$’000
2013
$’000
(restated)1
4,061
13,336
1,841
313
1,408
20,959
(13,754)
7,205
12,601
8,358
20,959
(12,057)
(1,697)
(13,754)
13,754
–
(9,820)
(3,934)
(13,754)
3,743
14,726
1,731
383
–
20,583
(13,520)
7,063
10,245
10,338
20,583
(11,229)
(2,291)
(13,520)
13,520
–
(10,427)
(3,093)
(13,520)
1 Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies and Note 14(b) for details regarding the restatement as
a result of an error.
89
(c) Movement in temporary differences during the year
DEFERRED TAX ASSETS
At 1 July 2012 (restated)1
(Charged)/credited:
– to profit or loss
– to other comprehensive income
AT 30 JUNE 2013 (RESTATED)
AT 1 JULY 2013
(Charged)/credited:
– to profit or loss
– to other comprehensive income
– direct to equity
AT 30 JUNE 2014
Employee
benefits
Payables
and
accruals
Property,
plant and
equipment
$’000
$’000
$’000
Tax
losses
$’000
Other
$’000
Total
$’000
4,780
15,300
476
1,655
(1,037)
–
3,743
578
(1,152)
14,726
(93)
–
383
76
–
1,731
3,743
14,726
383
1,731
–
–
–
–
–
318
(1,390)
(70)
110
–
–
–
–
–
–
–
–
1,076
332
–
22,211
(476)
(1,152)
20,583
20,583
44
332
–
4,061
13,336
313
1,841
1,408
20,959
1 Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies.
DEFERRED TAX LIABILITIES
At 1 July 2012 (restated)2
Charged/(credited):
– to profit or loss
– to other comprehensive income
AT 30 JUNE 2013 (RESTATED)
AT 1 JULY 2013
Charged/(credited):
– to profit or loss
– to other comprehensive income
AT 30 JUNE 2014
2 Refer to Note 14(b) for details regarding the restatement as a result of an error.
Deferred
revenue Intangibles
$’000
$’000
Other
$’000
Total
$’000
11,812
162
1,639
13,613
(583)
–
11,229
11,229
828
–
12,057
(162)
–
–
–
–
–
–
91
561
(654)
561
2,291
13,520
2,291
13,520
(591)
(3)
1,697
237
(3)
13,754
helloworldlimited.com.au 16. Trade and other payables
Trade creditors
Accruals
Other payables
CONSOLIDATED
2014
$’000
2013
$’000
125,572
165,076
34,885
36,925
25,287
46,588
197,382
236,951
Trade creditors are non-interest bearing and are normally settled within 30 day terms. Non-trade payables and accruals
are non-interest bearing.
Related party payables
For terms and conditions of related party payables, refer to note 26.
Foreign exchange risk
Details regarding foreign exchange risk exposure are disclosed in note 24.
91
17. Borrowings
CURRENT
Secured bank loan
Other secured financing1
Unsecured financing
NET CURRENT INTEREST BEARING LIABILITIES
NON-CURRENT
Secured bank loan
Less: deferred borrowing costs
NET NON-CURRENT INTEREST BEARING LIABILITIES
CONSOLIDATED
2014
$’000
–
–
892
892
25,319
25,319
(1,974)
23,345
2013
$’000
818
165
1,008
1,991
24,434
24,434
(1,409)
23,025
1 Other secured financing is secured against motor vehicle purchases in Fiji included as part of property, plant and equipment in note 13.
Financing Facilities
The following lines of credit were available at balance date:
DRAWN DOWN AT BALANCE DATE
Secured Bank Loan – AUD
Secured Bank Loan – NZD $10m
Secured Bank Loan – FJD $2m2
UTILISED AT BALANCE DATE
Secured Multi-Option Revolving Credit Facilities – Multi Currency3
UNUSED AT BALANCE DATE
Secured Bank Loan – AUD
Secured Bank Loan – AUD4
Secured Bank Loan – NZD $10m
Secured Bank Loan – FJD $2m2
Secured Multi-Option Revolving Credit Facilities – Multi Currency3
TOTAL FACILITIES
Secured Bank Loan – AUD
Secured Bank Loan – AUD4
Secured Bank Loan – NZD $10m
Secured Bank Loan – FJD $2m2
Secured Multi-Option Revolving Credit Facilities – Multi Currency3
TOTAL
CONSOLIDATED
2014
$’000
2013
$’000
Maturity
16,000
9,319
–
25,319
9,928
35,247
16,100
15,000
–
–
30,072
61,172
32,100
15,000
9,319
–
40,000
96,419
16,000
8,434
818
25,252
10,008
35,260
16,100
–
–
334
30,079
46,513
32,100
–
8,434
1,152
40,087
81,773
17/04/2019
Amortising
17/04/2019
30/08/2017
17/04/2019
2 The Group disposed of subsidiaries in Fiji during the year, as part of this transaction the FJD Bank loans were transferred to the Vendor.
3 Multi-option facilities at 30 June 2014 and 30 June 2013 used entirely for Bank Guarantees and Letters of Credit.
4 $15 million amortising tranche. $1 million amortised in each of October 2015 and April 2016. Further $1.5 million amortised in each of
October 2016 and April 2017. Further $2.0 million amortised in each of October 2017, April 2018 and October 2018. Remaining $4 million
amortised on April 2019.
helloworldlimited.com.au (a) Secured liabilities and assets pledged as security
The total secured liabilities (current and non-current) are as follows:
Secured bank loans
Secured financing
CONSOLIDATED
2014
$’000
25,319
–
25,319
2013
$’000
25,252
165
25,417
The Australian and New Zealand bank loans are secured against the assets of those entities included in the Deed of
Cross Guarantee of the Group. These entities do not operate as licensed travel agents and are not subject to any other
external regulation preventing them from providing encumbrances In addition the bank loans are secured against the
assets of trading entities domiciled in New Zealand.
The Fijian bank loan is secured against the assets of the Fijian businesses. The Group disposed of subsidiaries in Fiji
during the year, as part of this transaction the FJD Bank loans were transferred to the Vendor.
The carrying amounts of assets pledged as security for current and non-current borrowings are detailed in note 30.
The multi-option revolving currency facility can be drawn at any time. The maturity dates for the facility and loans are
outlined above.
On 17 April 2014 the secured loan terms and conditions were re-negotiated with the Group’s banking partner.
The facility was extended to 17 April 2019. As part of the re-negotiated terms, an additional amortising facility of
$15.0 million was agreed. The Group incurred $1.1 million in borrowing costs that were capitalised and will be amortised
over the duration of the new facility agreement.
(b) Set-off of assets and liabilities
There are currently no contractual arrangements establishing a legal right to set-off assets and liabilities with any
financial institutions.
(c) Fair values
Information about the carrying amounts and fair values of interest bearing liabilities is disclosed in note 24.
(d) Risk exposures
Information about the Group’s exposure to interest rate and foreign currency changes is provided in note 24.
93
18. Defined Benefit Plan
As part of the Merger arrangement, the Group entered into a Superannuation Deed with Qantas Airways Limited setting
out the arrangements which would apply (post-merger) to employees of the Group that are also members of the Qantas
Superannuation Plan (divisions of which are in the nature of Defined Benefit Plan). Under the deed, HLO assumed
responsibility for the plan assets and plan liabilities for these members in a new Defined Benefit Plan controlled and managed
by HLO. The plan assets and liabilities were transferred to HLO on 25 July 2011. This plan is closed to new members.
The following sets out details in respect of the defined benefit plan only. The expense recognised in relation to the
defined benefit contribution plan is disclosed separately in note 4.
Changes in accounting policy
The Group has adopted the revised AASB 119 Employee Benefits during the year ended 30 June 2014. The revised
Standard requires the changes to be adopted retrospectively, and adjustments to the defined benefit obligations have
been recognised at the beginning of the earliest comparative period presented (1 July 2012) and the income statement
and statement of comprehensive income were restated for the comparative period. The impact of these restatements
is disclosed separately in Note 3(b)(iii).
CHANGES IN THE PRESENT VALUE OF DEFINED BENEFIT OBLIGATION
Opening defined benefit obligation
Current service cost
Past service cost
Interest cost
Member contributions
Actuarial gains from changes in financial assumptions
Actuarial gains from changes in other
Payments from the plan
CLOSING DEFINED BENEFIT OBLIGATION
CHANGES IN THE FAIR VALUE OF PLAN ASSETS
Opening fair value of plan assets
Interest income
Return on plan assets (excluding interest income)
Employer contributions
Member contributions
Payments from the plan
CLOSING FAIR VALUE OF PLAN ASSETS
EXPENSE RECOGNISED IN THE CONSOLIDATED INCOME STATEMENT
Current service cost
Interest cost
Interest income
TOTAL INCLUDED IN EMPLOYEE BENEFITS EXPENSE
CONSOLIDATED
2014
$’000
11,799
976
–
462
152
–
(842)
(2,347)
10,200
13,059
516
1,238
492
152
(2,347)
13,110
976
462
(516)
922
2013
$’000
(restated)
14,244
1,160
–
441
265
(1,252)
(974)
(2,085)
11,799
12,097
393
1,854
535
265
(2,085)
13,059
1,160
441
(393)
1,208
ACTUAL RETURN GAIN ON PLAN ASSETS
1,238
1,854
EXPENSE RECOGNISED IN THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Actuarial gains recognised during the period
Cumulative actuarial gains and (losses) recognised
TOTAL AMOUNT RECOGNISED IN THE BALANCE SHEET AT BEGINNING OF PERIOD
Amount recognised in the statement of comprehensive income
Total expense
Employer contributions
TOTAL AMOUNT RECOGNISED IN THE BALANCE SHEET AT END OF PERIOD
2,080
3,885
1,260
2,080
(922)
492
2,910
4,079
1,805
(2,146)
4,079
(1,208)
535
1,260
helloworldlimited.com.au GROUP PLAN ASSETS COMPRISE:
Australian equities
International equities
Property
Fixed interest, cash and indexed bonds
Private equity
Cash
RECONCILIATION TO CONSOLIDATED BALANCE SHEET
Fair value of plan assets
Present value of defined benefit obligation
SURPLUS
Less: unrecognised actuarial losses
RECOGNISED ASSET IN THE CONSOLIDATED BALANCE SHEET
Experience adjustments (loss)/gain on plan assets
Experience adjustments gain/(loss) on plan liabilities
CONSOLIDATED
2014
%
29.8
31.3
18.1
12.1
3.3
5.4
2013
%
29.7
28.9
20.8
15.5
0.2
4.9
100.0
100.0
CONSOLIDATED
2014
$’000
2013
$’000
(restated)
13,110
(10,200)
2,910
–
2,910
–
–
13,059
(11,799)
1,260
–
1,260
–
–
At present the Group has no legal obligation to settle this liability with an immediate contribution or additional one off
contributions.
Significant estimates actuarial assumptions and sensitivity
The significant actuarial assumptions were as follows:
Discount rate
Expected rate of salary increases
Discount rate
Salary growth rate
4.00%
3.50%
4.00%
3.50%
Impact on defined
benefit obligations
Change in
assumption
Increase in
assumption
Decrease in
assumption
0.25%
0.25%
Decrease
by 4.2%
Increase
by 4.3%
Increase
by 4.4%
Decrease
by 4.2%
Comparative information has not been provided for the sensitivity analysis as permitted by the transitional provisions
of the revised standard.
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant.
In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the
sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the
defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been
applied as when calculating the defined benefit asset recognised in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior
period.
95
Risk Exposure
The Plan exposes HLO to risks such as interest rate risk, investment risk and inflation risk.
Interest Rate Risk
Interest rate risk results from the Plan’s liabilities being discounted at a rate based on prevailing Commonwealth
Government Bond yields at each accounting date. Higher yields result in a lower value of the defined benefit obligation
and lower yields result in a higher value of the defined benefit obligation.
Investment Risk
The Plan invests in a diversified investment strategy. Given the level of diversification in the underlying investments, the
Plan is unlikely to suffer any significant loss from underperformance by the failure of an individual underlying security.
Salary Inflation Risk
The Plan’s defined benefit obligations are linked to salary and therefore a higher than expected rate of salary inflation
results in higher defined benefit obligations, unless these inflationary increases are accompanied by compensating
higher rates of investment return.
The expected long-term rate of return is based on the weighted average of expected returns on each individual asset
class where the weightings reflect the proportion of defined benefit assets invested in each asset class. Each asset
class’ expected return is based on expectations of average returns over the next 10 years.
Actuarial gains and losses recognised in the Statement of Comprehensive Income arise as a result of changes in the
discount rate applied to calculate the net present value of employees’ benefits (due to changes in government bond
rates during the prevailing period), as well as fair value adjustments made to the value of plan assets, and changes in
actuarial assumptions around expected return on plan assets and expected rates of salary increases.
Defined benefit asset and employer contributions
The Group makes contributions to the plan which provides defined benefit amounts for employees upon retirement.
Under the plan, employees are entitled to retirement benefits determined, at least in part, by reference to a formula
based on years of membership and salary levels.
The Group monitors the plan asset balance on an annual basis and currently contributes at a rate of 14.7% of salaries
for Division 2 members and 10.9% for Division 3 members which is consistent with the Plan actuary’s recommendation
in the most recent actuarial valuation as at 25 July 2011 (reported on 24 July 2012). The next actuarial valuation as at
30 June 2014 will be undertaken in FY15.
Employer contributions are determined based on actuarial advice and are set to target the assets of the Plan exceeding
the total of members’ vested benefits. Based on the contribution recommendations made in the most recent actuarial
investigation of the Plan dated 24 July 2012, the estimated net employer contributions will be approximately $470,000
for the year ending 30 June 2015 (2014: $784,000).
The duration of the defined benefit obligation of the Plan is estimated to be approximately 12 years. A breakdown of
plan liabilities by duration is as follows:
DEFINED BENEFIT OBLIGATION MATURITY ANALYSIS
Less than 5 years
Between 5 - 10 years
Between 10 - 20 years
Over 20 years
TOTAL
30 June 2014
23.1%
16.0%
39.9%
21.0%
100.0%
helloworldlimited.com.au 19. Provisions
CURRENT
Employee benefits – long service leave
Employee benefits – annual leave
Lease make good
Onerous lease contracts
Restructuring
Other
NON-CURRENT
Employee benefits – long service leave
Onerous lease contracts
(a) Movements in provisions
CONSOLIDATED
2014
$’000
4,121
4,797
1,394
187
1,130
1,123
2013
$’000
4,580
5,954
1,563
472
1,486
1,031
12,752
15,086
981
389
1,370
1,289
504
1,793
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
CONSOLIDATED
Restructuring
$’000
Lease
make good
$’000
Onerous lease
contracts
$’000
Other
$’000
Total
$’000
NET BOOK AMOUNT
Balance at 1 July 2013
Provisions made against capitalised assets
Provisions charged to income statement
Unused amounts released to income statement
Amounts included in businesses disposed of
(Discount)/unwind of discount
Payments made/transfers from provision
Foreign currency differences
BALANCE AT 30 JUNE 2014
Current
Non-current
TOTAL
1,486
–
2,091
(786)
–
–
(1,661)
–
1,130
1,130
–
1,130
1,563
21
–
–
(142)
–
(48)
–
1,394
1,394
–
1,394
976
–
–
(27)
(250)
61
(195)
11
576
187
389
576
1,031
–
355
(123)
(56)
–
(98)
14
1,123
1,123
–
1,123
5,056
21
2,446
(936)
(448)
61
(2,002)
25
4,223
3,834
389
4,223
97
(b) Nature and timing of provisions
Lease make good
A provision is recognised in respect of existing lease contracts for the estimated present value of expenditure required
to complete dismantling and site restoration obligations under those contracts at balance date. Future dismantling and
restoration costs are reviewed annually. Any changes are reflected in the present value of the lease make good provision
at the end of the reporting period.
The amount of the provision for future lease make good costs is capitalised and amortised in accordance with the
policy set out in note 3(h). The unwinding of the effect of discounting of the provision, where relevant, is recognised as a
finance expense.
Onerous lease contracts
A provision for onerous lease contracts is recognised when the expected benefits to be derived by the Group from a
contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at
the present value of the expected cost of terminating the contract and the expected net cost of continuing the contract.
Restructuring
Restructuring and redundancy provisions are recognised as an expense when the Group has made a commitment to the
process, and this has been agreed and communicated to those affected. All payments are expected to be settled within
the next accounting period.
(c) Amounts not expected to be settled within the next 12 months
The Group does not expect all employees to take the full amount of accrued leave or require payment within the next
12 months.
helloworldlimited.com.au 20. Deferred revenue
Deferred revenue
CONSOLIDATED
2014
$’000
66,019
66,019
2013
$’000
75,992
75,992
Details on the deferred revenue accounting policy are contained in note 3(n).
21. Auditors’ remuneration
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its
related practices and non-related audit firms.
AUDIT SERVICES
Auditor of the Company – PricewaterhouseCoopers (PwC) Australia
– Audit and review of Financial Statements
Related practices of PwC Australia
Non – PwC audit firms
OTHER SERVICES
Auditor of the Company – PwC Australia
– Taxation compliance services
– Other services
RELATED PRACTICES OF PwC AUSTRALIA
– Tax
– Other
CONSOLIDATED
2014
$
2013
$
710,000
157,089
18,245
885,334
62,000
100,237
162,237
65,364
30,560
95,924
739,000
139,345
21,900
900,245
54,950
58,687
113,637
28,382
26,114
54,496
TOTAL AUDITORS’ REMUNERATION
1,143,495
1,068,378
99
22. Capital and reserves
(a) Shares on issue
AS AT 30 JUNE 2014
Fully paid ordinary shares of Helloworld Limited
CONTRIBUTED EQUITY
AS AT 30 JUNE 2013
Fully paid ordinary shares of Helloworld Limited
CONTRIBUTED EQUITY
CONSOLIDATED
Number
of Shares
440,548,572
440,548,572
439,953,581
439,953,581
$’000
278,822
278,822
278,822
278,822
HLO Ordinary Shares
Holders of ordinary shares in HLO are entitled to receive dividends as declared from time to time and are entitled to one
vote per share at HLO shareholders’ meetings. In the event of the winding up of HLO, ordinary shareholders rank after
creditors and are fully entitled to any proceeds of liquidation. There is only one class of share on issue in HLO.
(b) Movements in shares on issue
OPENING BALANCE 1 JULY 2012
Issue to Long Term Incentive Plan participants on 25 October 2012
BALANCE 30 JUNE 2013
Issue to Long Term Incentive Plan participants on 19 September 2013
BALANCE 30 JUNE 2014
CONSOLIDATED
Number
of Shares
$’000
439,105,954
278,822
847,627
–
439,953,581
278,822
594,991
–
440,548,572
278,822
helloworldlimited.com.au (c) (Accumulated losses)/retained earnings
Movements in (accumulated losses)/retained earnings were as follows:
BALANCE 1 JULY
Net (loss)/profit for the period
Items of other comprehensive income recognised directly in retained earnings
Actuarial gains on defined benefit plan, net of tax
Dividends paid
BALANCE 30 JUNE
1 Refer to Note 3(b)(iii) regarding the restatements for changes in accounting policies.
CONSOLIDATED
2014
$’000
1,894
(63,347)
1,586
(2,203)
(62,070)
2013
$’000
(restated1)
(12,815)
16,180
2,929
(4,400)
1,894
Note
8
(d) Other reserves
RESERVES
Foreign currency translation reserve
Hedging reserve
Predecessor accounting reserve
Share-based payment reserve
Share-based payment trust reserve
Movements:
FOREIGN CURRENCY TRANSLATION RESERVE
BALANCE 1 JULY
Currency translation differences arising during the year
Amounts reclassified to profit or loss on disposal of net investment in foreign operation
BALANCE 30 JUNE
HEDGING RESERVE
BALANCE 1 JULY
Revaluation – gross
Deferred tax
BALANCE 30 JUNE
PREDECESSOR ACCOUNTING RESERVE
BALANCE 1 JULY
Revaluation
BALANCE 30 JUNE
SHARE-BASED PAYMENT RESERVE
BALANCE 1 JULY
Share-based payment expense
Transfer from share-based payment trust reserve
BALANCE 30 JUNE
SHARE-BASED PAYMENT TRUST RESERVE
BALANCE 1 JULY
Treasury shares purchased on market
Transfer to share based payment reserve
BALANCE 30 JUNE
2,205
(90)
156,400
1,895
(246)
197
1,494
156,400
1,808
–
160,164
159,899
197
1,283
725
2,205
1,494
(2,457)
873
(90)
(1,687)
1,884
–
197
179
1,994
(679)
1,494
156,400
156,400
–
–
156,400
156,400
1,808
87
–
1,895
–
(246)
–
(246)
1,274
569
(35)
1,808
–
(35)
35
–
101
Nature and purpose of other reserves
Foreign currency translation reserve
Exchange differences arising on translation of the foreign operations are taken to the foreign currency translation
reserve, as described in note 3(d). The cumulative amount is reclassified to profit or loss when the net investment is
disposed of.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedging transactions that have not yet occurred, as described in Note 3(v). Amounts are
reclassified to the income statement when the associated hedge transaction affects profit and loss.
Predecessor accounting reserve
Any differences between the net assets acquired and the consideration provided in relation to common control
transactions are recorded in the predecessor accounting reserve, as described in Note 3(ac). Under common control, the
Company has recorded the interest in the acquired company based on the book values of the assets and liabilities that
were previously attributable to the subsidiary at the highest level of consolidation. As a result, no fair value adjustments
are recorded on the acquisition.
Share-based payments reserve
The share-based payments reserve is used to recognise the grant date fair value of Performance Share Rights issued to
eligible employees but not exercised.
Share-based payments trust reserve
Where any group company or trust purchases the company’s equity instruments, for example purchases of shares by the
Helloworld Employee Share Trust, the consideration paid, including any directly attributable incremental costs (net of
income taxes) is recorded in the share based payments trust reserve until the shares are cancelled or reissued. Where
such ordinary shares are subsequently reissued, any consideration paid, net of any directly attributable incremental
transaction costs and the related income tax effects, is transferred to the share based payments reserve.
helloworldlimited.com.au 23. Reconciliation of net (loss)/profit after tax to the net cash flows
from operating activities
NET (LOSS)/PROFIT AFTER TAX
Adjustments for:
Depreciation and amortisation
Non-controlling interests
Gain on sale of non-current assets
Impairment losses on trade receivables
Share of profits of associates
Share based payments expense
Loss on disposal of investments
Impairment of goodwill
Fair value loss on revaluation of investment property
Changes in operating assets and liabilities:
Decrease in trade and other receivables
Decrease/(increase) in other financial assets
Decrease in trade and other payables
Decrease in provisions
Increase in other non-current liabilities
Movements in tax balances
NET CASH (OUTFLOWS)/INFLOWS FROM OPERATING ACTIVITIES
There were no non cash financing and investing activities undertaken during the year (2013: nil).
CONSOLIDATED
2014
$’000
2013
$’000
(restated)
(63,347)
16,180
14,032
10,805
104
(7)
207
(165)
115
5,473
59,500
–
2,308
3,410
(45,781)
(1,611)
560
(5,643)
(30,845)
180
(34)
216
(136)
616
–
–
246
10,596
(3,966)
(455)
(4,604)
72
5,741
35,457
103
24. Financial risk management
The Group’s principal financial instruments comprise receivables, payables, cash, short-term deposits, borrowings and
derivatives. The Group manages its exposure to key financial risks, including currency risk in accordance with a set of
policies approved by the Board. The Group’s policy is to not enter into, issue or hold derivative financial instruments for
speculative trading purposes.
Financial Risk management is carried out by Group Treasury under policies approved by the Board of Directors. Group
Treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units.
Details of the significant accounting policies and methods adopted, including criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised in respect of each class of financial asset,
financial liability and equity instrument are disclosed in note 3.
The Group holds the following financial instruments:
FINANCIAL ASSETS
Cash and cash equivalents
Trade receivables
Derivative financial instruments
FINANCIAL LIABILITIES
Trade and other payables (excludes accruals)
Interest bearing liabilities
Derivative financial instruments
CONTINGENT FINANCIAL LIABILITIES
Bank Guarantees and Letters of Credit
Liquidity risk
CONSOLIDATED
2014
$’000
2013
$’000
184,320
51,927
–
234,934
62,807
3,321
236,247
301,062
162,497
26,211
2,710
211,664
26,425
321
191,418
238,410
9,928
9,928
10,008
10,008
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage
to the Group’s reputation.
Management monitors rolling forecasts of the Group’s liquidity reserves (comprising the undrawn facilities outlined
in note 17) and cash and cash equivalents (outlined in note 10) on the basis of expected cash flows. Financing
arrangements are outlined in note 17.
helloworldlimited.com.au The following table summarises the contractual undiscounted cash flows of financial liabilities as at 30 June 2014 and
30 June 2013:
Carrying
amount
CONSOLIDATED
Contractual cash flows
0–6
months
$’000
6–12
months
$’000
1 to 2
years
$’000
2 to 3
years
$’000
3 to 4
years
$’000
4 to 5
years
$’000
$’000
More
than
5 years
$’000
Total
$’000
2014
NON-DERIVATIVE FINANCIAL LIABILITIES
Trade and other payables
162,497 162,497
–
–
–
–
–
Interest bearing liabilities – secured1
25,319
1,523
1,528
3,128
3,199
2,774 27,516
Interest bearing liabilities – unsecured
892
–
892
–
–
–
–
– 162,497
– 39,668
–
892
Bank Guarantees and Letters of Credit
–
2,847
2,786
1,549
697
289
899
861
9,928
DERIVATIVE FINANCIAL LIABILITIES
Cash flow hedges
Interest rate swaps
2013
NON-DERIVATIVE FINANCIAL LIABILITIES
2,551
2,374
159
–
177
–
–
159
–
–
–
–
–
–
–
–
2,551
159
191,418 169,241
5,383
4,836
3,896
3,063 28,415
861 215,695
Carrying
amount
CONSOLIDATED
Contractual cash flows
0–6
months
$’000
6–12
months
$’000
1 to 2
years
$’000
2 to 3
years
$’000
3 to 4
years
$’000
4 to 5
years
$’000
$’000
More
than
5 years
$’000
Total
$’000
Trade and other payables
211,664 211,664
–
–
–
Interest bearing liabilities – secured1
25,417
1,870
1,915
2,594 25,085
Interest bearing liabilities – unsecured
1,008
504
504
–
Bank Guarantees and Letters of Credit
–
3,377
3,105
1,022
–
227
–
–
–
–
–
–
– 211,664
– 31,464
–
1,008
772
289
1,216 10,008
DERIVATIVE FINANCIAL LIABILITIES
Interest rate swaps
321
–
–
–
321
238,410 217,415
5,524
3,616 25,633
–
772
–
–
321
289
1,216 254,465
1 Excludes deferred borrowing costs
Details on the interest bearing liabilities and facilities, including maturity dates are contained in note 17.
Market risk
The Group has exposure to market risk in the areas of foreign exchange and interest rates. The following section
summarises the Group’s approach to managing these risks.
(i) Foreign exchange risk
Foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates. The source and nature of this risk arises predominantly from payments
to overseas suppliers in the Wholesale operations. In order to protect against exchange rate movements, the group
has entered into forward exchange contracts to purchase foreign currencies. These contracts are hedging highly
probable forecasted purchases for the ensuing financial year and are timed to mature when payments to suppliers
are scheduled to be made.
105
On initial designation of the hedge, the Group formally documents the relationship between the hedging instruments and
the hedged items, including the risk management objectives and strategy in undertaking the hedge transaction, together
with the methods that will be used to assess the effectiveness of the hedging relationship. Forward foreign exchange
contracts are used to hedge a portion of remaining foreign currency exposure within specific parameters. For this to
occur the Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis,
whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash
flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results
of each hedge are within a range of 80-125%. For a cash flow hedge of a forecast transaction, the transaction should be
highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported
net income.
As at 30 June 2014, the Group’s net exposure to foreign currency risk is set out in the table below. The table includes the
following:
• foreign cash holdings as at year end;
• receivables denominated in foreign currencies as at year end;
• current trade payables and forward payment obligations in foreign currencies as at year end; and
• foreign currency exchange contracts outstanding as at year end.
CURRENCY
USD
EUR
GBP
FJD
NZD
Other currencies
NET TOTAL FOREIGN CURRENCY EXPOSURE LIABILITY
2014
AUD
equivalent
$’000
2013
AUD
equivalent
$’000
(2,325)
(1,240)
(337)
(1,661)
(195)
(1,571)
(7,329)
(195)
(1,433)
100
(11,072)
737
(3,032)
(14,895)
The following table summarises the impact of a reasonably possible change in foreign exchange rates on net profit.
For the purpose of this disclosure, the sensitivity analysis assumes a 10% increase and decrease in foreign exchange
rates. Sensitivity analysis assumes hedge effectiveness as at 30 June 2014. This analysis also assumes that all other
variables, including interest rates, remain constant.
10% increase
10% decrease
CONSOLIDATED
Net Profit Before Tax
2014
$’000
1,837
(2,245)
2013
$’000
2,170
(2,651)
(ii) Interest rate risk
Interest rate risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. The Group’s exposure to interest rate risk is on its cash assets and its cash
borrowings issued at variable rates. Cash includes short-term deposits amounting to $66 million (2013: $85.1 million)
paying a weighted average fixed rate of 3.27% per annum (2013: 3.53%). The Group has entered into interest rate
swaps to mitigate interest rate risk on its variable rate borrowings. Other funds are held in operational and foreign
currency bank accounts and during the year earned interest at market rates under normal commercial terms.
All short-term deposits are fixed rate instruments and accordingly, a change of 100 basis points per annum in interest
rates at the reporting date would have no impact on the profit and the net equity of the Group (2013: nil).
helloworldlimited.com.au Credit risk
Credit risk is the potential loss from a transaction in the event of a default by the counterparty during the term of
the transaction or on settlement of the transaction. Credit exposure is measured as the cost to replace existing
transactions should a counterparty default.
The Group transacts with the following major counterparties:
• Trade debtor counterparties: the credit risk is the recognised amount, net of any impairment loss. As at 30 June 2014,
this amounted to $51.9 million (2013: $62.8 million). The Group has credit risk associated with travel agents, airlines,
industry settlement organisations and direct suppliers. The Group minimises credit risk through the application of
stringent credit policies and accreditation of travel agents through industry programs; and
• HLO’s most significant customer is Qantas Airways Limited and its subsidiaries, details of these transactions are
outlined in note 26.
Where specific credit risk is identified with a counterparty, the Group requires pre-payment for services provided. A
reservation for such a counterparty is not confirmed or ticketed prior to receiving payment in full. Due to the short term
nature of these receivables, their carrying amount is assumed to be their fair value.
The maximum exposure to credit risk is the fair value of the receivables. Collateral is not held as security, nor is it the
Group’s policy to transfer receivables to special purpose entities.
The ageing of trade receivables not considered impaired, or provided for as impaired, at 30 June was:
Neither past due nor impaired
Past due 1 – 30 days
Past due 31 – 60 days
Past due 61 – 90 days
Past due 91 – 120 days
More than 120 days
TOTAL
CONSOLIDATED
2014
$’000
2013
$’000
44,965
51,677
2,612
1,003
791
1,149
1,407
5,529
3,476
181
1,283
661
51,927
62,807
As at 30 June 2014, trade receivables of $7.0 million (2013: $11.1 million) were past due but not impaired. These relate
to a number of independent counterparties for whom there is no recent history of default.
There are no significant other receivables, or other classes of receivables, that have been recognised that would
otherwise, without negotiation, have been past due or impaired. It is expected that these amounts will be received when
due. The Group does not hold any collateral in relation to these receivables.
The ageing of trade receivables identified as impaired at 30 June was:
Neither past due nor impaired
Past due 1 – 30 days
Past due 31 – 60 days
Past due 61 – 90 days
Past due 91 – 120 days
More than 120 days
TOTAL
CONSOLIDATED
2014
$’000
2013
$’000
14
7
8
377
9
380
795
–
11
170
235
–
502
918
107
The movement in the allowance for impairment losses in respect of trade receivables was as follows:
BALANCE AS AT 1 JULY
Additional provision recognised
Write back of provision
Bad debts written off
Foreign currency differences
BALANCE AS AT 30 JUNE
CONSOLIDATED
2014
$’000
918
207
(299)
(62)
31
795
2013
$’000
2,217
216
(1,362)
(183)
30
918
An allowance for impairment losses is made when there is objective evidence that a trade receivable is impaired. In the
current period an additional $0.2 million (2013: $0.2 million) provision has been recognised by the Group. The amount of
the allowance is measured as the difference between the carrying amount of the trade receivables and the estimated
future cash flows expected to be received from the relevant debtors.
The table below sets out the maximum exposure to credit risk as at 30 June:
Cash and cash equivalents
Trade and other receivables
CONSOLIDATED
2014
$’000
184,320
105,470
289,790
2013
$’000
234,934
112,501
347,435
The Group undertakes transactions with a large number of customers and other counterparties in various countries in
accordance with Board approved policy. Where a higher than acceptable credit risk is identified with a counterparty, the
Group looks to implement measures which minimise the risk of losses and in some cases seeks to renegotiate customer
trading terms by requiring the customer to prepay on purchases in advance of confirmation of a travel booking.
Net fair values
The net fair values of cash, cash equivalents and non-interest bearing financial assets and financial liabilities
approximate their carrying values due to their short maturity.
FINANCIAL ASSETS AT AMORTISED COST
Cash and cash equivalents
Trade and other receivables
FINANCIAL LIABILITIES AT AMORTISED COST
Trade creditors
Other payables
Interest bearing liabilities - current
Interest bearing liabilities – non-current
CONSOLIDATED
CARRYING AMOUNT
NET FAIR VALUE
Note
2014
$’000
2013
$’000
2014
$’000
2013
$’000
10
11
16
16
17
17
184,320
105,470
289,790
125,572
36,925
892
23,345
186,734
234,934
112,501
347,435
165,076
46,588
1,991
23,025
236,680
184,320
105,470
289,790
125,572
36,925
892
25,319
188,708
234,934
112,501
347,435
165,076
46,588
1,991
24,434
238,089
helloworldlimited.com.au Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been
defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices)
• Level 3: inputs for the assets or liabilities that are not based on observable market data (unobservable inputs)
The Group’s forward exchange contracts are recognised at their fair value determined using forward exchange rates at
the balance sheet date, with the resulting value discounted back to present value.
2014
NET DERIVATIVE FINANCIAL LIABILITIES
2013
NET DERIVATIVE FINANCIAL ASSETS
Capital management
$’000
Level 1
Level 2
Level 3
–
–
2,710
2,710
–
–
$’000
Level 1
Level 2
Level 3
–
–
3,000
3,000
–
–
Total
2,710
2,710
Total
3,000
3,000
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the business. The Board monitors both the return on capital and the level of dividends to
ordinary shareholders.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders.
There were no changes in the Group’s approach to capital management during the year.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
109
25. Commitments and contingencies
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
Within one year
After one year but not more than five years
Longer than five years
AGGREGATE LEASE EXPENDITURE CONTRACTED FOR AT REPORTING DATE
CONSOLIDATED
2014
$’000
7,925
15,407
148
23,480
2013
$’000
9,189
16,287
1,674
27,150
The Group has entered into commercial leases on property and certain items of office equipment. These leases have
an average life of between 2 and 12 years and generally provide the Group with a right of renewal at which time all terms
are renegotiated. There are no restrictions placed upon the lessee by entering into these leases.
The Group recognised rent expenses of $11.5 million in the period (2013: $13.1 million).
Leases as lessor
The Group sub-leases surplus office space under operating leases. The Group also leases one investment property. The
future minimum lease receipts under these leases are as follows:
Within one year
After one year but not more than five years
Longer than five years
AGGREGATE LEASE EXPENDITURE CONTRACTED FOR AT REPORTING DATE
CONSOLIDATED
2014
$’000
636
1,245
–
1,881
2013
$’000
66
83
–
149
The Group recognised lease rental income of $0.1 million (2013: $0.2 million). Rental income is derived from the sub
lease of surplus office space and lease of one investment property. In addition to this the Group received rental income
for which rent is derived from sub lease arrangements on a month by month contract basis. The future minimum lease
receipts above do not include expected future income from these arrangements owing to short term nature of the
arrangement.
Guarantees
Other than the Deed of Cross Guarantee entered into with its subsidiaries, as outlined in note 30, HLO has on issue at
30 June 2014 bank guarantees and letters of credit totalling $9.9 million (2013: $10.0 million).
Contingencies
There are no significant contingent liabilities.
GST Claim before the Federal Court of Australia
The group is currently involved in a legal case in relation to a GST matter. The final outcome of the matter cannot yet be
assessed with certainty. Additional information in relation to the matter is disclosed in note 7(g).
helloworldlimited.com.au 26. Related party transactions
(a) Subsidiaries
Details relating to subsidiaries are included in note 27.
(b) Ultimate and direct parent
Helloworld Limited (HLO) is the legal owner of the Group. However, under the applicable accounting standards, a reverse
acquisition by Stella Travel Services Holdings Pty Limited (STSH) is deemed to have occurred on the Merger of STSH
with HLO. Consequently, for accounting purposes, STSH is accounted for as the ultimate and direct parent entity of the
Group.
(c) Entities with significant influence over the Group
QH Tours Limited (a wholly owned subsidiary of Qantas Airways Limited) holds 29% of the ordinary shares of HLO,
Europe Voyager NV holds 27% of the ordinary shares of HLO, and UBS Australia Holdings Limited (UBSAHL) holds
18% of the ordinary shares of HLO. Under the Merger agreement QH Tours Limited and Europe Voyager NV were
entitled to appoint two Board members each, and UBSAHL one Board member, consequently these three shareholders
were considered to hold significant influence over the Group. In accordance with the Merger agreement, in the event
that these Board members resign from their directorship, the Merger agreement does not allow for these shareholders
to nominate an alternate Director. Currently, one of each of the QH Tours Limited and Europe Voyager NV Directors
appointed at the time of the Merger remain on the Board of HLO.
(d) Key management personnel compensation
Short term employee benefits
Long term employee benefits
Share-based payment benefits
Post-employment benefits
Termination benefits
Detailed remuneration disclosures are provided in the remuneration report on pages 25 to 43.
CONSOLIDATED
2014
$
2013
$
4,514,060
5,840,963
19,245
103,432
128,246
–
108,159
353,905
203,342
859,524
4,764,983
7,365,893
111
(e) Transactions with related parties
The following transactions were carried out with related parties:
TRADING TRANSACTIONS
(i) Revenue derived from:
Associates of the Group
Entities with significant influence over the Group1
Other related parties3
(ii) Expenses incurred as a result of transactions with:
Associates of the Group
Entities with significant influence over the Group1
Other related parties3
(iii) Dividends received from:
Associates of the Group
YEAR END BALANCES
(i) Assets:
Associates of the Group
Entities with significant influence over the Group1
(ii) Liabilities:
Associates of the Group
Entities with significant influence over the Group1
TRANSACTIONS ASSOCIATED WITH THE MERGER
(i) Payments for services provided under the Umbrella agreement2 from:
Entities with significant influence over the Group1
(ii) Payments for employee related statutory entitlements2 to:
Entities with significant influence over the Group1
CONSOLIDATED
2014
$’000
2013
$’000
119
57,277
–
–
2,294
–
48
1,431
12,684
1,422
3,951
208
58,351
8
72
4,893
101
185
–
9,917
1,185
4,732
–
1,547
11,319
13,348
1 QH Tours Limited (a wholly owned subsidiary of Qantas Airways Limited) holds 29% of the ordinary shares of HLO, Europe Voyager NV holds
27% of the ordinary shares of HLO, and UBS Australia Holdings Limited holds 18% of the ordinary shares of HLO.
In addition to ordinary trading transactions and as part of the Merger agreement, the Group entered into an umbrella agreement with Qantas
Airways Limited (and its controlled entities). The agreement was intended to facilitate a transition to arrangements directly between HLO and
relevant third party suppliers and provide for the continuation of the ordinary course of business activities of the Group. Services provided
under the agreement include shared services, national sales agency agreements, IT services, labour recharges, frequent flyer arrangements,
intellectual property rights and website agreements.
Includes transactions with Director related entities and key management personnel.
2
3
Terms and conditions of related party receivables and payables
Related party trade receivables are non-interest bearing and are generally on 30 day terms. The Group settles related
party trade payables according to the payment conditions confirmed by the supplier of services.
Qantas Airways Limited and Qantas Holidays Limited are party to the Qantas Frequent Flyer Program Participating
(Retail) Agreement (the Agreement).
helloworldlimited.com.au (f) Transactions with Director related entities
Year ended 30 June 2014 and year ended 30 June 2013
A Cummins is Chairman of STS UK Holdco II Limited and Global Voyager Holdings Pty Limited which are controlled by
Europe Voyager NV, also a shareholder which is deemed to have significant influence over HLO. In addition, A Cummins is
Chairman of Mantra Group Limited (formerly Mantra Group Holdings I Pty Limited) which EV Hospitality NV is deemed
to have significant influence over. EV Hospitality NV is considered a related party of HLO as EV Hospitality NV and
Europe Voyager NV are commonly controlled entities. Details of transactions with STS UK Holdco II Limited and Mantra
Group Limited are included in part (e) above.
E Gaines is a director of Global Voyager Holdings Pty Limited, STS UK Holdco I Pty Limited and Global Voyager Group
Admin Pty Limited which are controlled by Europe Voyager NV, also a shareholder and deemed to have significant
influence over HLO. In addition, E Gaines is a director of Mantra Group Limited (formerly Mantra Group Holdings I Pty
Limited) which EV Hospitality NV is deemed to have significant influence over. EV Hospitality NV is considered a related
party of HLO as EV Hospitality NV and Europe Voyager NV are commonly controlled entities. Details of transactions
with these companies and their related entities are included in part (e) above.
Year ended 30 June 2013
P Lacaze (CEO and Executive Director until 27 August 2012) was a director of Stella Global Travel Pty Limited and
STS UK Holdco Pty Limited which are controlled by Europe Voyager NV, also a shareholder and deemed to have
significant influence over HLO. Details of transactions with these companies and their controlled entities are included
in part (e) above.
P Spathis was a Director of HLO until 28 November 2012 (appointed as a Director of HLO by Sintack Pty Limited, which
holds 12.3% of ordinary shares of HLO) and a corporate executive with Consolidated Travel Pty Limited. Sintack Pty
Limited is controlled by Mr Alysandratos). Mr Alysandratos also holds a controlling interest in Consolidated Travel Pty
Limited and is a director of Consolidated Travel Pty Limited and Chesters Nominees Pty Limited. HLO held a sub-lease
agreement with Consolidated Travel Pty limited during the period for which $0.01 million of income (2012: $0.02 million)
was received.
A MacKenzie (Director of HLO until 31 December 2012) was a director of Mantra Group Holdings Pty Limited and Global
Voyager Holdings Pty Limited which is controlled by Europe Voyager NV, also a shareholder which is deemed to have
significant influence over HLO. Details of transactions with Mantra Group are included in part (e) above.
(g) Transactions with key management personnel
The Group entered into an operating lease agreement over business premises in Perth with a related party (who ceased
to be a related party from 30 October 2012). The contract terms and conditions and the agreed contract price is on
an arm’s length basis and under conditions no more favourable than had the lessor been an independent third party.
Amounts paid in respect of this contract are included in part (e) above.
Other transactions with key management personnel are outlined in the Remuneration Report on pages 25 to 43.
(h) Terms and conditions
Sales to and purchases from related parties are made at arm’s length at normal market prices and on normal commercial
terms.
Transactions relating to dividends are on the same terms and conditions applicable to other shareholders.
Outstanding balances are unsecured and are repayable in cash.
(i) Guarantees
Guarantees provided or received for any related party receivables or payables have been disclosed in note 17.
113
27. Particulars in relation to controlled entities as at 30 June 2014
The consolidated financial statements incorporate the assets, liabilities and results of the following principal
subsidiaries in accordance with the accounting policy described in note 3(a). The proportion of ownership interest
is equal to the proportion of voting power held.
Helloworld Group
Ownership Interest
Country of
incorporation
2014
%
2013
%
CONTROLLED ENTITIES
Helloworld Limited
Jetset Travelworld Network Pty Limited
Jetset Pty Limited
JTG Corporate Pty Limited
Helloworld Services Pty Limited
National Cruise Centre Pty Limited
Helloworld Group Pty Limited
QBT Pty Limited
Qantas Holidays Limited
ACN 139 386 520
Travelworld Pty Limited
Retail Travel Investments Pty Limited
Harvey World Travel Group Pty Limited
Harvey World Travel Franchises Pty Limited
Travelscene Pty Limited
Harvey World Travel International Pty Limited
Travelscene Tickets Pty Limited
Transonic Travel Pty Limited
Australian Travel Services (Pacific) Limited
Allied Tour Services Pacific Limited
Coral Sun Limited
Stella Travel Services (Australia) Pty Limited
Travel Indochina Limited
Best Flights Pty Limited
World Aviation Systems (Australia) Pty Limited
Global Aviation Services Pty Limited
Stella Travel Services (NZ) Limited
Atlantic and Pacific Business Travel Limited
GP Holiday Shoppe Limited
Gullivers Pacific Limited
Harvey World Travel (2008) Ltd
Just Tickets Limited
United Travel Limited
Atlantic & Pacific Business Travel Pty Limited
Travel Co Investments No. 2 Pty Limited
Montarge Pty Limited
Travel Advantage Pty Limited
Helloworld NZ Limited
Global Aviation Services (Australasia) Limited
Biztrav Limited
Aus STS Holdco II Pty Limited
Stella Travel Services Group Pty Limited
Betanza Pty Limited
ACN 003 683 967
Travelscene Holidays Pty Limited
Concorde International Travel Inc.
Note
1, 2
2
2
ABN/ACN
60 091 214 998
23 124 732 136
30 098 029 362
128 834 588
2, 5
85 124 719 508
86 135 179 485
47 108 306 243
50 128 382 187
24 003 836 459
72 139 386 520
81 074 285 224
094 188 100
073 203 291
059 507 587
001 763 819
073 203 264
056 166 682
103 179 326
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
NZ# 487 031
New Zealand
Fiji# 13411
Fiji# 13988
003 237 296
UK# 0525 0591
095 507 010
003 237 189
099 065 040
NZ# 182 9492
NZ# 519 813
NZ# 1953 053
NZ# 128 2538
NZ# 593 524
NZ# 155 6299
NZ# 100 6869
061 265 610
111 633 624
100 625 607
004 009 296
NZ #92 083
NZ# 127 5961
NZ# 833 384
138 225 331
097 772 702
072 181 161
003 683 967
111 606 743
Fiji
Fiji
Australia
UK
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
USA
3
8
2
4
4
4
10
2
2
9
2
N/A
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
72
100
100
100
100
100
100
N/A
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
72
100
100
100
100
100
100
helloworldlimited.com.au
CONTROLLED ENTITIES
Stella Travel Services USA Inc.
Tourist Transport Fiji Limited
Great Sights Fiji Limited
Harvey Holidays Pty Limited
Encore Business Tourism Pty Limited
QBT (NZ) Limited
Travel Indochina Vietnam Co. Ltd
Travel Indochina Lao Co Limited
Advanced Applications (UK) Limited
Helloworld Franchising Pty Limited
Helloworld Digital Pty Limited
Helloworld IP Pty Limited
Note
ABN/ACN
Country of
incorporation
USA
Fiji
Fiji
Australia
Australia
Fiji# 5312
Fiji #686
061 284 866
57 006 805 625
NZ# 3982078
New Zealand
UK# 067 33115
164 402 304
164 402 215
164 402 288
Vietnam
Laos
UK
Australia
Australia
Australia
4
4
7
6
6
6
Helloworld Group
Ownership Interest
2014
%
100
2013
%
100
–
–
100
100
100
95
70
100
100
100
100
60
60
100
100
100
95
70
–
–
–
–
1. Helloworld Limited is the legal owner of the Group. However, under the applicable accounting standards, a reverse acquisition by Stella Travel
Services Holdings Pty Limited is deemed to have occurred on the Merger at 30 September 2010. Consequently, for accounting purposes,
Stella Travel Services Holdings Pty Limited is the parent entity of the Group.
2. Pursuant to ASIC Class Order 98/1418 (as amended), these controlled entities are relieved from the Corporations Act 2001 requirements for
preparation, audit and lodgement of financial statements.
On 9 May 2014 Helloworld Group Pty Limited changed its name from National Ticket Centre Pty Limited.
3.
4. On 30 September 2013, the Group disposed of its investment in Australian Travel Services (Pacific) Limited and the net assets associated
with the ATS Pacific Australia business was completed. The sale of the investment for Allied Tour Services Pacific Limited, Coral Sun Limited,
Tourist Transport Fiji Limited and Great Sights Fiji Limited was completed on 4 April 2014. See note 31 for further information.
5. On 2 December 2013 Helloworld Services Pty Limited changed its name from JTG Services Pty Limited.
6. During the year HLO incorporated Helloworld Franchising Pty Limited, Helloworld Digital Pty Limited and Helloworld IP Pty Limited. HLO holds
100% of the share capital on issue for these entities as at 30 June 2014.
7. On 1 November 2013 Helloworld Services Pty Limited acquired 100% interest in Advanced Applications (UK) Limited. See note 31 for further
information.
8. On 2 December 2013 ACN 139 386 520 changed its name from Ready Travel Pty Limited.
9. On 30 September 2013 ACN 003 683 967 changed its name from ATS Pacific Pty Limited.
10. On 7 May 2014 Helloworld NZ Limited changed its name from United Touring Limited.
Transactions with non-controlling interests
There were no other transactions with non-controlling interests during the period, other than those disclosed in this report.
28. Investments in associates
Information relating to associates is set out below:
INVESTMENTS IN ASSOCIATES
Harvey World Travel Southern Africa (Pty) Limited
Note
Merraford Pty Limited
Maridore Pty Limited
Resortpac Pty Limited
Vallane Pty Limited
Fine Travel Pty Limited
Travel Co Investments Pty Limited
Present Australia Pty Limited
Talpacific Holidays (UK) Limited
Tour Managers (Fiji) Limited
1
2
Helloworld Group
Ownership Interest
ABN/ACN
Country of
incorporation
2014
%
2013
%
SA# 1981/00 1738/07
South Africa
100 625 581
100 625 572
064 579 273
100 625 643
109 344 587
110 761 923
060 613 816
UK# 04 575 488
Fiji# 16936
Australia
Australia
Australia
Australia
Australia
Australia
Australia
UK
Fiji
50
25
30
30
39
30
49
–
50
33
50
50
25
30
30
39
30
49
25
50
33
50
115
Harvey World Travel Strategy Group Ltd
NZ# 569 145
New Zealand
1 The Group disposed of its investment in Fine Travel Pty Limited on 8 July 2014.
2 The Group disposed of its investment in Present Australia Pty Limited during the year.
29. Parent Entity Disclosures
As at, and throughout, the financial year ended 30 June 2014 the legal parent company of the Group was Helloworld Limited.
RESULT OF THE PARENT ENTITY
Loss for the year
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
FINANCIAL POSITION OF PARENT ENTITY AT YEAR END
Current assets
Non-current assets
TOTAL ASSETS
Current liabilities
Non-current liabilities
TOTAL LIABILITIES
NET ASSETS
TOTAL EQUITY OF THE PARENT ENTITY COMPRISING OF:
Share capital
Reserves
Share-based payment reserve
Share-based payment trust reserve
(Accumulated losses)/retained earnings
TOTAL EQUITY
COMPANY
2014
$’000
2013
$’000
(656)
(656)
54,360
428,234
482,594
31,292
2
31,294
451,300
(105,056)
(105,056)
62,509
323,155
385,664
41,852
1
41,853
343,811
435,755
435,755
1,764
(246)
(93,462)
343,811
1,748
–
13,797
451,300
An impairment review was undertaken at 30 June 2014. The loss for the period includes impairment of $104,000,000
recorded against the carrying value of Helloworld Limited’s investments in subsidiaries.
Helloworld Limited (HLO) is the legal owner of the Group. However, under the applicable accounting standards, a reverse
acquisition by Stella Travel Services Holdings Pty Limited (STSH) is deemed to have occurred on the Merger of STSH
and HLO. For accounting purposes, STSH is the deemed parent entity of the Group.
Parent entity guarantees in respect of debts of its subsidiaries
The legal parent Helloworld Limited has entered into a Deed of Cross Guarantee with the effect that the Company
guarantees debts in respect of its subsidiaries. Details of the Deed of Cross Guarantee and the subsidiaries subject to
the deed are disclosed in note 30.
Parent entity tax balances in respect of its subsidiaries
The parent entity has entered into a tax funding agreement with the effect that the Company guarantees tax liabilities
of other entities in the tax consolidated group. As at 30 June 2014 the tax consolidated group had a tax receivable due
of $0.3 million. A tax liability of $6.6 million in 2013 was guaranteed by the Company.
Parent entity commitments and contingencies
The parent entity has no contractual commitments for the acquisition of property, plant and equipment and no
contingent liabilities as at 30 June 2014 (2013: none).
helloworldlimited.com.au 30. Deed of cross guarantee
Pursuant to Class Order 98/1418, the entities identified in note 27 are relieved from the Corporations Act 2001
requirements for preparation, audit and lodgement of financial statements and Directors’ reports.
As a condition of the Class Order, Helloworld Limited, Travelworld Pty Limited and Jetset Pty Limited (Closed Group)
entered into a Deed of Cross Guarantee on 25 May 2007. National Ticket Centre Pty Limited, Qantas Holidays Limited
and QBT Pty Limited joined the Deed of Cross Guarantee on 28 November 2008. Jetset Travelworld Network Pty
Limited, JTG Corporate Pty Limited, Helloworld Services Pty Limited, National Cruise Centre Pty Limited and ACN
139 386 520 Pty Limited were added to the Deed on 2 December 2009. Following the Merger of STS and HLO, Stella
Travel Services Group Pty Ltd, Aus STS Holdco Pty Ltd, Stella Travel Service Holdings Pty Ltd, Transonic Travel Pty
Limited and Travelscene Pty Ltd joined the Deed of Cross Guarantee on 31 March 2011.The effect of the Deed is that
Helloworld Limited has guaranteed to pay any deficiency in the event of the winding up of the controlled entities or if
they do not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject to guarantee.
The controlled entities which are party to the Deed have also given a similar guarantee in the event Helloworld Limited is
wound up or if it does not meet its obligations under the terms of overdrafts, loans, leases or other liabilities subject to
guarantee.
On 31 March 2011 Travelworld Pty Limited, Jetset Pty Limited, National Ticket Centre Pty Limited, Qantas Holidays
Limited and QBT Pty Limited ceased to be members of the closed group, the class action applied to these members for a
period of up to 6 months following formal notice to ASIC of their intention to leave. These entities were de-consolidated
from the Closed Group in 2012.
The consolidated income statement and statement of financial position have been prepared in accordance with the
accounting policy note 3(a), comprising the Company and the controlled entities which are party to the Deed, after
eliminating all transactions between parties to the Deed of Cross Guarantee and is set out below.
117
(a) Closed group income statement, statement of comprehensive income and
summary of movements in retained earnings for the year ended 30 June
CLOSED GROUP INCOME STATEMENT
REVENUE
Employee benefits expenses
Advertising, selling and marketing expenses
Communication and technology expenses
Occupancy and rental expenses
Operating expenses
Depreciation and amortisation
Loss on disposal of investments
OPERATING RESULT
Finance expense
LOSS BEFORE INCOME TAX
Income tax benefit
LOSS AFTER INCOME TAX
Closed group statement of comprehensive income
LOSS AFTER INCOME TAX
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss:
Change in fair value of cash flow hedges net of income tax
OTHER COMPREHENSIVE INCOME FOR THE PERIOD, NET OF INCOME TAX
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD, NET OF INCOME TAX
Summary of movements in closed group retained earnings
RETAINED EARNINGS AT THE BEGINNING OF THE FINANCIAL YEAR
Current year loss
Dividends paid
(ACCUMULATED LOSSES)/RETAINED EARNINGS AT THE END OF YEAR
2014
$’000
2013
$’000
17,234
(14,728)
(6,997)
(1,152)
(955)
25,949
(17,521)
(12,301)
(1,533)
(1,246)
(26,780)
(22,614)
(1,153)
(8,146)
(42,677)
(2,484)
(45,161)
11,711
(33,450)
(362)
–
(29,628)
(2,628)
(32,256)
9,711
(22,545)
(33,450)
(22,545)
114
114
194
194
(33,336)
(22,351)
7,340
(33,450)
(2,203)
(28,313)
34,285
(22,545)
(4,400)
7,340
helloworldlimited.com.au (b) Closed group statement of financial position as at 30 June
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Income tax receivable
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets and goodwill
Investments
Deferred tax assets
Other non-current assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Borrowings
Derivative financial instruments
Deferred revenue
Income tax payable
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Provisions
Deferred tax liabilities
Other liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Other reserves
(Accumulated losses)/retained earnings
TOTAL EQUITY
2014
$’000
2013
$’000
5,386
203,268
299
17,806
168,562
–
208,953
186,368
520
1,213
1,433
244
358,274
366,126
5,697
632
366,336
575,289
5,022
95
372,920
559,288
382,008
322,770
892
159
50
–
4,414
–
322
–
6,618
5,669
387,523
335,379
14,026
14,632
601
1,449
1,762
17,838
405,361
169,928
648
1,984
943
18,207
353,586
205,702
196,839
196,839
1,402
(28,313)
169,928
1,523
7,340
205,702
119
31. Business acquisitions and disposals
(a) Disposal of the Inbound operations
On 29 August 2013, the Group announced the disposal of its investment in Allied Tour Services Pacific Limited, Coral Sun
Limited, Tourist Transport Fiji Limited, Great Sights Fiji Limited and Australian Travel Services (Pacific) Limited. As part of
the same transaction, the Group also disposed of the net assets associated with the ATS Pacific Australia business.
These businesses have not been reclassified as discontinued operations as they were not material to the Group
Consolidated Income Statement or Group Consolidated Financial Position.
On 30 September 2013, the disposal of the investment in Australian Travel Services (Pacific) Limited (a company
incorporated in New Zealand) and the net assets associated with the ATS Pacific Australia business was completed. The
sale of the investment for the companies domiciled in Fiji (being Allied Tour Services Pacific Limited, Coral Sun Limited,
Tourist Transport Fiji Limited and Great Sights Fiji Limited) received regulatory approval from the Reserve Bank of Fiji
and the Fiji Revenue & Customs Authority on 4 April 2014.
The Financial Report as at 30 June 2014 includes the impact of the sale of the Australian, New Zealand and Fijian
businesses.
(i) Details of sale of the Inbound operations
CONSIDERATION RECEIVED OR RECEIVABLE:
Cash
Adjustment for working capital at completion date
Fair value of contingent consideration
TOTAL DISPOSAL CONSIDERATION
Carrying amount of net assets sold
Equity reserves brought to account
LOSS ON SALE BEFORE INCOME TAX
Income tax benefit
LOSS ON SALE AFTER INCOME TAX
$’000
2,637
924
900
4,461
(10,193)
259
(5,473)
192
(5,281)
helloworldlimited.com.au (ii) Carrying amounts of assets and liabilities associated with the Australian, New Zealand
and Fijian businesses
The carrying amounts of assets and liabilities at sale completion date were:
Client cash1
Receivables and other debtors (including client debtors)
Prepayments
Property, plant and equipment
Goodwill
TOTAL ASSETS
Creditors and other liabilities (including client creditors)
Provisions
Unearned income
TOTAL LIABILITIES
NET ASSETS DISPOSED
$’000
5,653
6,269
826
2,933
8,375
24,056
(10,178)
(1,737)
(1,948)
(13,863)
10,193
1
As outlined in Note 10, client cash includes monies entrusted to the Group by intending travellers or customers prior to travelling. The amount
of client cash disposed by the business was equal to the net client liability position for the businesses disposed.
(b) Acquisition of Advanced Applications (UK) Limited
On 1 November 2013, Helloworld Services Pty Limited (a wholly owned subsidiary) acquired 100% interest in the
business of Advanced Applications (UK) Limited (Advanced Applications) for consideration of $2.4 million. This
comprises cash consideration of $1.8 million and deferred consideration of $0.6 million payable on 31 October 2016.
As a result of the acquisition, the Group recognised intangible assets of $2.4 million representing intellectual property
owned by Advanced Applications which is used in the Group’s Air Tickets business.
121
32. Share-based payments
(a) Long Term Incentive Plan (LTIP)
Background
The Board has adopted the Helloworld Limited Performance Rights Plan (‘Plan’) and the Plan was approved by
Shareholders at the 2011 AGM. Under the Plan conditional rights to acquire shares in the Company (‘Performance
Rights’) are awarded to eligible senior executives of the Company as the long term incentive component of their
remuneration for each relevant financial year.
Each Performance Right generally gives the holder a conditional right to acquire one fully paid share in the Company if
any applicable performance or other vesting conditions are satisfied (or waived).
Administration and Awards made under the Plan
The Plan is administered by the Plan Committee, which is currently the Remuneration and Nominations Committee. The
Plan Committee determines the number of Performance Rights to be granted to each eligible employee and the amount
payable by the holder of a Performance Right on exercise. The current intention is that participants will not be required
to pay any amount in respect of the award of Performance Rights or on acquisition of Shares pursuant to the exercise
or conversion of Performance Rights.
Performance Criteria and Vesting
The Plan Committee may, in its absolute discretion, specify performance or other vesting conditions that must be
satisfied for a grant of Performance Rights to vest, and may determine the performance period over which any such
condition must be satisfied.
If an Award of Performance Rights specified any performance conditions, the Performance Right will not vest and
become a vested Performance Right unless those performance conditions have been satisfied, reached or met during
the applicable performance period (unless otherwise determined by the plan committee). The Plan Committee has
retained the discretion under the Plan to vary the terms of Performance Rights by reducing or waiving any applicable
performance conditions, reducing any applicable performance period, determining a new share acquisition date or
period end and, where applicable, determining a new first or last exercise date (at any time and in any particular case).
Change of Control Provisions
Unless otherwise determined by the Plan Committee, if a change of control event occurs, all of a participant’s
Performance Rights will vest and become Vested Performance Rights even though any applicable performance
conditions may not have been satisfied at that time. A change of control event means:
• A person acquires voting power (within the meaning of section 610 of the Corporations Act) in more than 50% of the
Shares in the Company as a result of a takeover bid or through a scheme of arrangement; or
• Any other event (including a merger of the Company with another company) which the Board determines in its
absolute discretion, to be a change of control event.
Lapse of Performance Rights
Unless otherwise determined by the Plan Committee, all unvested Performance Rights held by a participant will lapse in
certain circumstances, including if:
• the participant voluntarily resigns from their employment or is dismissed from their employment for a reason
which entitles their employer to terminate their employment without notice in circumstances that are, in the Plan
Committee’s opinion such that the Performance Rights should lapse (including as a result of poor performance); or
• any applicable performance conditions are not satisfied, met or reached by the end of the applicable performance
period (or any extended performance period).
If a participant ceases employment in various other circumstances before the end of the performance period applicable
to their unvested Performance Rights, then (unless the Plan Committee determines otherwise) only a proportion of
those Performance Rights will lapse. This proportion will be determined by reference to the fraction of the performance
period during which the employee will not be an employee.
helloworldlimited.com.au Performance Conditions for Awards made for the year ending 30 June 2011, 30 June 2012,
30 June 2013 and 30 June 2014
The Performance Rights granted for the years ending 30 June 2011, 30 June 2012, 30 June 2013 and 30 June 2014
are subject to performance conditions linked to growth in the Company’s Adjusted earnings per share (‘Adjusted EPS’).
Adjusted EPS is EPS adjusted for significant, non-recurring and/or unusual items as approved by the Remuneration
and Nominations Committee (RNC). Adjusted EPS is a financial measure which is not prescribed by Australian
Accounting Standards but is a measure used by the RNC to assess the vesting of Performance Rights. The Adjusted EPS
performance conditions are determined by reference to cumulative basic Adjusted EPS, aggregated over the applicable
performance period, measured against a specified Adjusted EPS target.
To achieve vesting, the aggregate Adjusted EPS performance for each performance period must meet or exceed the
applicable targets determined by the Plan Committee.
Fifty per cent (50%) of each tranche of the Performance Rights will vest at the minimum specified EPS performance,
one hundred per cent (100%) at or above the maximum specified performance, with ‘straight line’ vesting in between.
Awards made in relation to the former CEO sign-on bonus
Awards were made under the Plan to R Gurney as a ‘sign-on bonus’ following his appointment as Managing Director and
Chief Executive Officer effective 27 August 2012. No amount is to be paid or payable by R Gurney in respect of the
award of Performance Rights or on acquisition of Shares pursuant to the vesting of Performance Rights. The vesting
date of the Performance Rights is the second anniversary of R Gurney’s commencement date, that is, 27 August 2014.
Performance Conditions for Awards made in relation to the former CEO sign-on bonus
The Performance Rights granted to the CEO as his sign-on bonus will be subject to a time based vesting condition with
the vesting date being the second anniversary of his commencement date with the Company, that is, on 27 August 2014.
The Performance Rights will lapse if, prior to the vesting date, the CEO voluntarily resigns from his employment or his
employment contract is terminated (unless the Plan Committee determines otherwise). No performance conditions will
apply to these Performance Rights as they were granted as an incentive for the CEO to join the company.
Awards made in relation to the former CEO-Special Performance Incentive
An award was made under the plan for the year ended 30 June 2014 for the CEO Special Performance Bonus. No amount
was paid or is payable in respect of the award of Performance Rights or on acquisition of Shares pursuant to the vesting
of these Performance Rights. The share price used in calculating the number of shares awarded was $0.40, which is the
allocation price determined by the Plan Committee. The award covers the period 1 July 2013 to 30 June 2015.
Performance Rights that do not meet the performance conditions will not vest unless those performance conditions are
met, except in limited circumstances such as change in control.
Performance Conditions for Awards made in relation to the former CEO Special Incentive Bonus
Performance Rights awarded for the CEO Special Incentive Bonus for the year ended 30 June 2014 are subject
to performance conditions linked to Company’s consolidated profit after income tax for FY15 as reported in the
Company’s audited consolidated income statement for FY15, subject to any adjustment in relation to exceptional items
as determined by the Plan Committee in its discretion (“PAT”). For the purposes of this performance condition, the
Plan Committee has set threshold and maximum targets, having regard to the business plan and strategy approved by
the board.
To achieve vesting, the FY15 PAT must meet or exceed the threshold target determined by the Plan Committee.
1,000,000 PRs (being 40% of the grant) will vest if the threshold target PAT is satisfied, while 2,500,000 PRs (being
100% of the grant) will vest if the maximum target is achieved or exceeded, with straight line vesting in between.
PAT
Below threshold target
At threshold target
Between threshold and maximum targets
Portion of PRs vesting
0%
40%
Pro-rata on a straight line basis from 40% to 100%
123
Set out below are summaries of Performance Share Rights (PRs) granted under the plan:
Tranche
Grant date
Start of
perfor-
mance
period
End of
perfor-
mance
period
Exercise
price1
$
CONSOLIDATED
Balance
at the
start of
the year
Granted
during
the year2
Exercised
during
the year
Lapsed
during
the year
Balance
at the
end of
the year
Vested and
exercisable
at the
end of
the year2,3
Number of shares
Former CEO
Special
Performance
Incentive2
22-Nov-13
1-Jul-13 30-Jun-15
$0.00
– 2,500,000
– (2,500,000)
–
2014-1
2014-2
2014-3
22-Nov-13
1-Jul-13 30-Jun-15
22-Nov-13
1-Jul-13 30-Jun-16
22-Nov-13
1-Jul-13 30-Jun-17
$0.00
$0.00
$0.00
–
–
–
121,823
121,823
125,516
CEO Sign-on
bonus
27-Aug-12 27-Aug-12 27-Aug-14
$0.00
815,217
–
–
–
–
–
–
–
121,823
121,823
125,516
–
815,217
– (242,342)
474,380
–
–
–
–
716,722
738,441
–
–
–
–
2013-13
2013-2
2013-3
2012-1
2012-23
2012-3
2011-1
2011-2
2011-33
TOTAL
26-Jun-12
1-Jul-12 30-Jun-14
26-Jun-12
1-Jul-12 30-Jun-15
26-Jun-12
1-Jul-12 30-Jun-16
26-Jun-12
1-Jul-11 30-Jun-13
26-Jun-12
1-Jul-11 30-Jun-14
26-Jun-12
1-Jul-11 30-Jun-15
1-Oct-10
1-Jul-10 30-Jun-12
1-Oct-10
1-Jul-10 30-Jun-13
1-Oct-10
1-Jul-10 30-Jun-14
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
716,722
716,722
738,441
506,084
506,084
521,420
–
299,538
288,717
– (335,298)
(170,786)
–
(31,703)
474,381
–
–
–
–
–
–
–
–
521,420
–
–
– (259,693)
(39,845)
–
–
(977)
287,740
5,108,945 2,869,162 (594,991)(2,985,653) 4,397,463
WEIGHTED AVERAGE EXERCISE PRICE
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
1 Vested performance rights automatically convert when performance targets are met and vesting date is realised. The performance rights are
not subject to an exercise price.
2 The performance conditions of the Special Performance Incentive were not met due to the resignation of the CEO and 100% of the grant lapsed.
3
The performance conditions for 2011-3 were met with 50.5% vesting after 30 June 2014. The performance conditions for the 2012-2 and
2013-1 were not met and these Performance Rights lapsed after 30 June 2014 but before the date of signing this report.
No Performance Rights expired during the period.
During the period 594,991 (2013: 935,443) Performance Rights converted into ordinary shares. The weighted average
share price at the date of the ordinary shares were issued was $0.44 (2013: $0.44).
The weighted average remaining contractual life of PRs outstanding at the end of the period was 1.14 years.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
helloworldlimited.com.au Fair value of Performance Rights granted
The assessed fair value at grant date of PRs granted during the year ended 30 June 2014 was for:
• 2014 Tranches 1,2 and 3, 34 cents per PR;
• Former CEO Special Performance Incentive, 40 cents per share.
The assessed fair value at grant date of PRSs granted during the year ended 30 June 2013 was:
• 2013 Tranches 1,2 and 3, 46 cents per share.
The fair value at grant date is calculated taking into account the share price on grant date and the exercise price.
(b) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee
benefits expense were $0.1 million (2013: $0.6 million).
33. Events subsequent to balance date
With the exception of the item disclosed below, there has not arisen in the interval between 30 June 2014 and the
date of this report, any event that would have had a material effect on the financial statements for the year ended
30 June 2014.
On-market share buy-back program
On 27 August 2014, Helloworld Limited announced an on-market share buy-back program of up to 2.5% of the
Company’s issued share capital.
125
DIRECTORS’
DECLARATION
In the directors’ opinion:
(a)
The consolidated financial statements and notes that are set out on pages 52 to 125 and the
Remuneration report in the Directors’ Report set out on pages 25 to 43, are in accordance with
the Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2014 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations), other mandatory professional reporting requirements and the
Corporations Regulations 2001; and
(b)
There are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable; and
(c)
At the date of this declaration there are reasonable grounds to believe that the Company and
the Group entities identified in note 27 will be able to meet any obligations or liabilities to
which they are or may become subject to by virtue of the deed of cross guarantee between the
Company and those Group entities pursuant to ASIC Class Order 98/1418.
Note 2(a) confirms that the consolidated financial statements also comply with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer required by section
295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Tom Dery
Chairman
Helloworld Limited
Sydney, 27 August 2014
helloworldlimited.com.au
Independent auditor’s report
to the members of Helloworld Limited
Report on the financial report
We have audited the accompanying financial report of Helloworld Limited (the Company),
which comprises the Consolidated Statement of Financial Position as at 30 June 2014, and
the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income,
Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows for
the year ended on that date, a summary of significant accounting policies, other explanatory
notes and the directors’ declaration for the Helloworld Group (the consolidated entity).
The consolidated entity comprises the company and the entities it controlled at the year’s end
or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report
that gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary
to enable the preparation of the financial report that is free from material misstatement,
whether due to fraud or error. In Note 2(a), the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. Those Standards
require that we comply with relevant ethical requirements relating to audit engagements
and plan and perform the audit to obtain reasonable assurance whether the financial report
is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the consolidated entity’s preparation and fair presentation of the financial report
in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation
127
An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinions.
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of Helloworld Limited is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at
30 June 2014 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001; and
(ii)
(b)
the financial report and notes also comply with International Financial Reporting Standards
as disclosed in note 2(a).
Report on the Remuneration Report
We have audited the remuneration report included in pages 25 to 43 of the directors’ report
for the year ended 30 June 2014. The directors of the company are responsible for the
preparation and presentation of the remuneration report in accordance with section 300A of the
Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report,
based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Helloworld Limited for the year ended 30 June
2014, complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Kristin Stubbins
Partner
Sydney
27 August 2014
helloworldlimited.com.au
ASX ADDITIONAL INFORMATION
Additional information required by the ASX and not shown elsewhere in this report is as follows.
The information is current as at 20 August 2014.
(a) Distribution of equity securities
The number of shareholders, by size of holding, are:
SHARES RANGE
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
TOTAL
Number
of holders
137
261
161
322
82
963
Number
of Shares
62,563
742,262
1,344,710
9,924,936
428,474,101
440,548,572
%
0.01
0.17
0.31
2.25
97.26
100.00
All issued ordinary shares carry one vote per share and carry the right to dividends. The number of holders holding a less than
marketable parcel of ordinary shares based on the market price as at 20 August 2014 was 196 holders holding 143,783 shares.
(b) Twenty largest holders of quoted equity securities
The names of the 20 largest registered holders of quoted shares are:
FULLY PAID ORDINARY SHARES AS AT 20 AUGUST 2014
ORDINARY SHAREHOLDERS
QH Tours Ltd
Europe Voyager NV
UBS Australia Holdings Limited
Sintack Pty Ltd
AOT Group Limited
J P Morgan Nominees Pty Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Edwrite Pty Limited
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